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Peter Curley, Managing Partner at Nirvana Financial Solutions, has published a thought leadership White Paper entitled "A Flat World, Multi-Prime and the One Path to Nirvana". It deals with the very topical issue of hedge funds going multi-prime. In particular, it explores why hedge funds are forming multiple-prime brokerage relationships and how these firms overcome the operational challenge involved with going multi-prime.
The Multi-Prime Requirement of a Flat World
The industry's most important service provider and the provider that most defines today's infrastructure is the prime broker. The model that has emerged is one of a single captive relationship with a hedge fund. The single prime provides everything that a domestic long/short equity fund requires to get up and running. These services include custody of assets, stock loan, financing, trading, trade ideas, capital introduction, office space and all their operational needs including an outsourced front, middle and back-office. In return the prime earns lucrative fees ($11 Billion in revenue for 2007) for stock loan, financing, and to a lesser extent, trade execution. Funds were satisfied with this model because, in many cases, there was no great difference in the services offered by the primes required to support the needs of a domestic long/short equity fund. Only when the fund matured well beyond its start-up phase did it consider adding more prime relationships. This move to multi-prime ...................... To view our full article Click here
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