Prime brokers failing to retain hedge funds
17 May 2017 New York
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Service providers to the hedge fund industry must “address concerns over cost and quality of service” in order to retain securities lending clients, according to Preqin’s Amy Bensted.
A Preqin survey of 270 hedge funds found that a quarter of respondents had changed service providers during 2016 due to dissatisfaction.
Of that quarter, 75 percent only changed one service provider and 39 percent switched prime brokers.
The survey was conducted in November 2016 and also used data on more than 2,000 hedge fund service providers from Preqin’s Hedge Fund Online database.
Preqin’s survey also revealed that 19 percent changed their fund custodian in 2016.
When questioned on their reason for changing providers, 55 percent cited cost as a key reason, with 21 percent citing dissatisfaction over service, according to Preqin.
A further 15 percent said that coping with regulations was also factor.
Amy Bensted, Head of Hedge Fund Products: “Service providers are a vital part of the hedge fund landscape, assisting in the smooth running of operations. They perform a range of vital services in the industry, such as custody and valuation of assets, facilitating securities lending, providing advice on regulation and fund terms, and assisting with the fundraising and investor subscription processes.
“In order to retain hedge fund clients and win new business, service providers need to address concerns over cost and quality of service, particularly as investor scrutiny over fees and performance continues to grow. These firms will need to maintain a careful balance by improving their service offering while still reducing costs.”
A Preqin survey of 270 hedge funds found that a quarter of respondents had changed service providers during 2016 due to dissatisfaction.
Of that quarter, 75 percent only changed one service provider and 39 percent switched prime brokers.
The survey was conducted in November 2016 and also used data on more than 2,000 hedge fund service providers from Preqin’s Hedge Fund Online database.
Preqin’s survey also revealed that 19 percent changed their fund custodian in 2016.
When questioned on their reason for changing providers, 55 percent cited cost as a key reason, with 21 percent citing dissatisfaction over service, according to Preqin.
A further 15 percent said that coping with regulations was also factor.
Amy Bensted, Head of Hedge Fund Products: “Service providers are a vital part of the hedge fund landscape, assisting in the smooth running of operations. They perform a range of vital services in the industry, such as custody and valuation of assets, facilitating securities lending, providing advice on regulation and fund terms, and assisting with the fundraising and investor subscription processes.
“In order to retain hedge fund clients and win new business, service providers need to address concerns over cost and quality of service, particularly as investor scrutiny over fees and performance continues to grow. These firms will need to maintain a careful balance by improving their service offering while still reducing costs.”
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