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Alternative Market Briefing

Ernst & Young’s survey details adaptability of prime brokers on back of changing hedge fund industry

Tuesday, September 24, 2013

Beverly Chandler, Opalesque London:

Ernst & Young’s latest survey of prime brokers finds that the industry is facing fresh challenges with the shifting climate of the hedge fund industry and increased regulatory requirement. The firm found that the largest prime brokers were attempting to stand out by offering unique products and using their ability to leverage of proprietary technologies and organisational efficiencies to better identify client needs.

Key takeaways from the survey included:

  • Elusive revenues

    Pressure on fees and the multi-prime trend in the prime brokerage industry are slowing the industry’s full recovery from the depths of the global financial crisis. Global prime brokerage revenues in 2012 were estimated at $12bn, down from $15bn in 2008. Hedge funds continue to diversify across number of prime brokers to alleviate concerns on counterparty risk.

    In 2006, the top two prime brokers, Goldman Sachs and Morgan Stanley, accounted for 52% of hedge fund assets. In 2012, they accounted for less than 33%. And medium-size prime brokers have been the beneficiaries as hedge funds diversified away from the giants, and international firms such as Deutsche Bank and Credit Suisse have made large inroads in the Americas.

  • Boosting profitability

    The prerequisite for creating a business mo......................

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