A New York-based prime brokerage head says he expects that the average cost to a hedge fund manager of using prime brokerage services will increase by five to 10 basis points over the coming year. “It’s too small to have a market impact for managers,” he says, “and, in any event, priorities have shifted away from selecting a prime broker based on cost.”
The price increase, he says, will occur as those prime brokers that, before the sub-prime crash, were underpricing their services in order to compete, have now been forced out of the market, or forced to increase their commissions in line with the industry.
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