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Prime brokerage global competition heats up

JPM expands into Europe as other firms add heads; Optimism for hedge fund industry growth

At the end of June, JPMorgan launched its European prime brokerage operations, adding around a dozen senior staff to London and obtaining a UK broker/dealer licence that now enables the bank to serve European clients as a European entity.

It is a big move for the bank that took on Bear Stearns’ prime brokerage business three years ago, but had, up to now, done little to expand the business. It speaks of renewed confidence in the hedge fund business and the role that prime brokerage will play for the large global financial institutions.

Bank of America Merrill Lynch also has recently added four people to its European business and plans to add more to its US franchise. BNP Paribas has spent the past 18 months building out a global operation, expanding on the US platform that it bought from Bank of America before the Merrill Lynch acquisition.

With the global push from JPMorgan and BAML, prime brokerage is becoming a crowded area once again.

Before the financial crisis, Goldman Sachs and Morgan Stanley dominated prime brokerage globally. During the crisis, hedge funds sought to diversify counterparty exposure and turned to peripheral players such as Credit Suisse and Deutsche Bank and JPMorgan, while others, such as UBS and Morgan Stanley, retreated somewhat.

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