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Alternative Market Briefing

New rules make banks more choosy on hedge fund clients

Wednesday, September 16, 2015

Komfie Manalo, Opalesque Asia for New Managers:

New regulatory rules are changing banks’ perspective and they are becoming more picky and choosy when providing prime brokerage services to hedge fund clients.

Jonathan Kinlay, CIO of New York-based Systematic Strategies LLC, told Reuters he had been turned down, albeit politely, by at least six banks for being too small..

"We'd love to help you. We know you. Give us a call as soon as you've got $50 million," Kinlay said of the response he usually gets from banks nowadays.

"You're seeing large funds look to consolidate their activity with fewer large primes so they are relevant enough in terms of wallet," the head of prime brokerage for Europe at a leading investment bank told Reuters.

Mounting regulatory pressure since the financial crisis is prompting banks to cull smaller and poorly paying clients. Many of the funds which do make the cut are being asked to pay more in fees or pump higher-quality business through the bank, the report says, adding that, as well as raising the bar for hedge fund launches, the changes are also leaving funds open to greater counterparty risk as they are forced to use fewer.

Since Basel III rules on leverage began to go live, hindering the amount of balance sheet they could e......................

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