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:
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.
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