Prime Brokerage Business

Prime Brokerage Business Update

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I just read a recent report from Finalternatives on the prime brokerage business. This report mentioned that prime brokerage firms expect $11 billion in hedge fund revenues this year, consequently major prime brokerages are vigorously competing for clients. JPMorgan and CitiGroup are playing catch-up with industry giants by bolstering their prime brokerage units. Meanwhile, the more established Deutsche Bank, Morgan Stanley, Merrill Lynch and Goldman Sachs are battling for dominance over the prime brokerage industry.

Last year, Morgan Stanley was the world’s largest prime broker holding $152.8 billion in assets under management from 455 funds. However, a major international survey showed that size isn’t everything. Deutsche Bank took first place, followed by Merrill Lynch and Morgan Stanley finished third. Morgan Stanley fares better with U.S. hedge funds, 59% reported having “a strong relationship” with the firm, while only 15% said that of Deutsche Bank.

The two biggest prime brokers, Goldman Sachs and Morgan Stanley, are building their reputation as the best in the industry. More and more hedge funds turn to the two firms because they have a strong reputation, as well as superior technology and support capabilities. While other major firms try to catch up by buying up talent from rivals, Morgan Stanley and Goldman Sachs are securing their dominant positions in prime brokerage.

- Richard

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Tags: Prime Brokerage Business, Prime Brokerage Company, Fixed Income Prime Brokerage, Prime Brokerage Survey 2008 / 2009, prime brokerage survey report, prime brokerage report

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