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Technological evolution needed as multi-prime model continues to gain momentum

Thursday, June 30, 2011
Opalesque Industry Update – The falling of Lehman Brothers served to cement the growing multi prime brokerage trend within the hedge fund industry. Hedge funds that found themselves unable to access their own money drove home the importance of infrastructural risk management, and the multi prime model is considered by many institutional investors to be a “best practices” consideration for investing. The drawback is the cost and the time constraints that multi primes can have on managers who need to find ways to gather data across multiple platforms, and research company Celent sees the need for a technology evolution that will keep up with managers needs as multi-prime grows more and more standard practice.

“The market is still dominated by single asset solutions, but the movement is clearly toward a multi-asset prime brokerage platform supporting clients’ expansion into new asset classes. Complete cross-product post-trade processing is where the industry needs to go to,” says Axel Pierron, SVP at Celent and author of the Celent Report “New Basis for the Hedge Fund/Prime Broker Relationship”.

“Prime brokers’ customers are expecting them to carry real time processing and statuses, intraday busi- ness controls, and real time settlement and position status. This is obviously challenging in a multi-asset and multi-market environment.” adds Pierron. “Additional tools are needed in the risk management context to accurately compute the portfolio’s exposure and other risk measures. Therefore, the platform should not be limited to providing a consolidated view of positions and integrated reporting.

Kirsten Bischoff

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