Warning to Accountants & Consultants: Prime brokerages are trying to eat your lunch
Jan 15th, 2008 | Filed under: Hedge Fund Industry TrendsThe Financial Times had an interesting special report yesterday on the prime brokerage industry. These brokerages have traditionally made the bulk of their revenues from two sources: ”borrow fees” associated lending stocks to short-sellers (see related posting) and interest charges on the leverage used by hedge funds. But as we’ve discussed on these pages before, the famously opaque stock-lending business is quickly being brought out into the daylight (see related posting). The danger, of course, is that the lucrative fees earned by the prime brokerages will come under pressure at some point.
Rather than sitting around and waiting for the day when there is a fully transparent market for short-selling, it seems many of the world’s prime brokerages are expanding into new revenue streams now. This isn’t entirely new, of course. Prime brokerages have long nurtured start-up hedge funds in an effort to bring into being their future clients (see related postings). But this time, things are different.
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
[…] “So it appears that the prime brokers are fashioning themselves as a sort of turn-key hedge fund industry - able to provide everything but the fund management itself.” (All About Alpha) […]