Prime brokerage enters a new paradigm
In Europe and Asia, UBS is the closest challenger to the top two prime brokerage players but Deutsche Bank and Credit Suisse are arguably now the best placed to grow. Neil Wilson reports.
We are entering a period of fundamental change for hedge funds. This is true not only for investors and managers but also for key service providers such as prime brokers.
This was made dramatically evident in March with the last-ditch rescue by JPMorgan of Bear Stearns – for many years among the top-three prime brokers in the US. At the time, ironically, Absolute Return was getting started on its first-ever research project attempting to measure market share among prime brokers in the US.
Not surprisingly, our data team was suddenly inundated with messages from funds using Bear Stearns as prime broker. Some said they were ditching Bear in favour of other firms; others that they were staying with Bear but adding other PBs to their roster; and others said that they were staying with Bear alone – now it was backed by the financial might of JPMorgan. Amid the confusion, we felt there was no choice but to delay our research and wait until the dust settled.
Outside the US, where EuroHedge and AsiaHedge have routinely conducted market share surveys for several years on prime brokers in Europe and Asia, we did not feel there was such a problem.