The top five trends in prime brokerage
11 June 2013 New York
Image: Shutterstock
Finadium and SunGard have identified five key trends in prime brokerage services and technology that they say are driving new approaches to client service to help firms achieve agile growth, win new business, and retain clients in this rapidly changing space.
The top five trends are:
1. Prime brokers remain one of the most important service providers for hedge funds, although the nature of this relationship is evolving. Hedge funds remain loyal to their prime brokers but also see their banks as more potentially vulnerable counterparties than in the past.
2. Prime brokers must be equipped to make smart choices about where to allocate technology and service resources to balance capturing client loyalty with supporting hedge fund independence.
3. As funds turn towards more listed and centrally cleared products, prime brokers must provide strong operational support and access to tools and services without enforcing exclusive relationships.
4. Operations remains a critical service that prime brokers offer to their hedge fund clients, but consulting services including legal and technology advisement is becoming an important differentiator.
5. Increased transparency and reporting appear to be the next frontiers for prime brokers in communicating with their hedge fund clients. In particular, equity-focused hedge funds are seeking more access to real-time stock loan data.
“A key challenge for prime brokers today is to understand how best to interact with their hedge fund clients, particularly around technology and services,” said Josh Galper, the managing principal at Finadium.
“The right technology can become a revenue driver while the wrong technology may result in client frustration and losses. Prime brokers must closely evaluate their financial, operational and technological resources to determine the best mix for deepening relationships and franchises with their target hedge fund clients.”
The top five trends are:
1. Prime brokers remain one of the most important service providers for hedge funds, although the nature of this relationship is evolving. Hedge funds remain loyal to their prime brokers but also see their banks as more potentially vulnerable counterparties than in the past.
2. Prime brokers must be equipped to make smart choices about where to allocate technology and service resources to balance capturing client loyalty with supporting hedge fund independence.
3. As funds turn towards more listed and centrally cleared products, prime brokers must provide strong operational support and access to tools and services without enforcing exclusive relationships.
4. Operations remains a critical service that prime brokers offer to their hedge fund clients, but consulting services including legal and technology advisement is becoming an important differentiator.
5. Increased transparency and reporting appear to be the next frontiers for prime brokers in communicating with their hedge fund clients. In particular, equity-focused hedge funds are seeking more access to real-time stock loan data.
“A key challenge for prime brokers today is to understand how best to interact with their hedge fund clients, particularly around technology and services,” said Josh Galper, the managing principal at Finadium.
“The right technology can become a revenue driver while the wrong technology may result in client frustration and losses. Prime brokers must closely evaluate their financial, operational and technological resources to determine the best mix for deepening relationships and franchises with their target hedge fund clients.”
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