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By Beverly Chandler, Opalesque London:

Small has proved beautiful for hedge funds struggling to find returns over recent periods of unpredictable markets. Analytics firm PerTrac recently reported that funds with less than $100m in assets have outperformed much larger funds in 13 out of the last 16 years. But starting small and getting any support from key service providers such as prime brokers is increasingly challenging as the banks themselves struggle with squeezed profit margins.

The high barriers to entry for fledgling funds from large banks have created a new phenomenon, boutique primes. In an interview with Opalesque, Kevin M. LoPrimo, MD, Global Head of Hedge Fund Services at Global Prime Partners (GPP) explains: "We don’t do anything that the big firms can’t do, but we do it for smaller managers."

LoPrimo estimates that threshold assets under management for a hedge fund to attract the attention of a large bank’s prime broking services now sits at least $100m as the potential fee income from smaller firms does not cover the costs of a prime brokerage team. "It’s not cost effective for the big banks to offer services to smaller funds" LoPrimo says. "The average cost per head count including salary, desk space, medical care benefits, pension and so on is creeping upon half a million. We are a small team with 30 people and our overheads are much less."

Global Prime Partners offers services to fund......................

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