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Prime Broker Market | Opportunities Challenges

Richard C. Wilson — Mon, 02 Feb 2009 22:24:47 +0000

h1 style="text-align: center;"bPrime Broker Market/b/h1h2 style="text-align: center;"bspan class="Apple-style-span" style="color: rgb(102, 0, 0);"Prime Broker Market Share Changes/span/b/h2br /a alt="Prime Broker Market" title="Prime Broker Market" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://richard-wilson.blogspot.com/"img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 200px; height: 134px;" src="http://3.bp.blogspot.com/_wM_OZdOMR_Y/SYdyLn7rGsI/AAAAAAAAC4E/e8pzEmbCEdU/s200/Prime-Broker-Market-Share-CLients.JPG" alt="Prime Broker Market" title="Prime Broker Market" id="BLOGGER_PHOTO_ID_5298329030648076994" border="0" //aBelow is a short article on how the market share between prime brokers is changing. Some banks are gaining over $1B a quarter in new assets while others are losing market share to those banks which appear to be less risky to hedge fund managers who are trying to lower counter-party risk. Here is the article excerpt:br /blockquoteThe collapse of Lehman Brothers last September was the flashpoint of a year that saw the prime brokerage world - along with that of its hedge fund clients - transformed by the ongoing credit crisis and grisly economic backdrop. But for those funds and brokers that come through the turbulence intact, the new landscape offers a broad range of opportunities for the coming years, according to Nick Roe, the London-based head of prime finance at Citi.br /br /While the hedge fund assets that were locked up in London after Lehman Brothers International (Europe) went into administration garnered headlines for a while, Roe argues that just as important was the spotlight turned on rehypothecation - the use by prime brokers of hedge fund assets as collateral for the borrowing they need to provide funding to those clients.br /br /'I believe the regulations regarding rehypothecation will change, with prime brokers forced into much more transparency,' he says. 'But it won't go away, because most hedge funds couldn't cope with the changed economic conditions if prime brokers weren't able to make use of some of their assets to deliver the required levels of funding.' a rel="nofollow" target="_blank" href="http://www.hedgeweek.com/articles/detail.jsp?content_id=290846"source/a/blockquoteh4Related to Prime Broker Market | Opportunities amp; Challenges/h4ol style="font-family:arial;"lispan style="font-size:100%;"a title="Prime Brokerage Services" href="http://richard-wilson.blogspot.com/2008/04/prime-brokerage-services.html" description="Prime Brokerage Services" alt="Prime Brokerage Services"Prime Brokerage Services/a/span/lilia title="prime broker" href="http://richard-wilson.blogspot.com/2008/02/prime-broker-definition.html" description="prime broker" alt="prime broker"Prime Broker Definition/a/lilia title="Best Prime Broker" href="http://richard-wilson.blogspot.com/2008/04/best-prime-broker.html" description="Best Prime Broker, merrill lynch prime brokerage, hedge fund prime broker, prime broker definition, prime brokerage job, prime brokerage career, fx prime broker" alt="Best Prime Broker"Best Prime Broker/a/lilia title="capital introduction" href="http://richard-wilson.blogspot.com/2007/09/capital-introduction.html" alt="capital introduction" description="capital introduction"Capital Introduction/a/lilia alt="Hedge Fund Administrators" title="Hedge Fund Administrators" description="Hedge Fund Administrators, Hedge Fund Administrator, Hedge Fund Administration, Hedge Funds Administrators, Hedge Funds Administrators" href="http://richard-wilson.blogspot.com/2008/05/hedge-fund-administrators.html"Hedge Fund Administrators/a/lilispan style="font-size:100%;"a title="Hedge Fund Research " href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-research.html" description="Hedge Fund Research" alt="Hedge Fund Research"Hedge Fund Research/a/span/lilia alt="Investment Research" title="Investment Research" description="Investment Research, Investments Research, Independent Investment Research, Investment Research Firms, Investment Research Firm" href="http://richard-wilson.blogspot.com/2008/05/investment-research.html"Investment Research/a/lilia description="Commercial Real Estate Brokers" alt="Commercial Real Estate Brokers" href="http://richard-wilson.blogspot.com/2008/05/commercial-real-estate-brokers.html" title="Commercial Real Estate Brokers"Commercial Real Estate Brokers/a/lilia description="hedge fund marketing" alt="hedge fund marketing" href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-marketing.html" title="hedge fund marketing"Hedge Fund Marketing/a/lilia description="Prime Brokerage, Prime Brokerage Services, Prime Brokerage Survey, FX prime brokerage, Currency Prime Brokerage, Synthetic Prime Brokerage" alt="Prime Brokerage" href="http://richard-wilson.blogspot.com/2008/06/prime-brokerage.html" title="Prime Brokerage"Prime Brokerage/a/li/olTags: Prime Broker Market, Prime Broker Trade, Prime Broker Trading, prime broker clients, prime brokerage clients, prime broker accounts, prime broker dealer, prime brokerdiv class="feedflare" a href="http://feeds2.feedburner.com/~f/richard-wilson-blog?a=YL2YP58S"img src="http://feeds2.feedburner.com/~f/richard-wilson-blog?i=YL2YP58S" border="0"/img/a a href="http://feeds2.feedburner.com/~f/richard-wilson-blog?a=lzTKHvpY"img src="http://feeds2.feedburner.com/~f/richard-wilson-blog?d=50" border="0"/img/a a href="http://feeds2.feedburner.com/~f/richard-wilson-blog?a=ilYSoGTO"img src="http://feeds2.feedburner.com/~f/richard-wilson-blog?i=ilYSoGTO" border="0"/img/a /divimg src="http://feeds2.feedburner.com/~r/richard-wilson-blog/~4/dpM15e_HfAk" height="1" width="1"/

New Prime Brokerage Model Emerging

Richard C. Wilson — Fri, 19 Dec 2008 16:12:09 +0000

h1 style="text-align: center;"bNew Prime Brokerage Model/b/h1h2 style="text-align: center;"bspan class="Apple-style-span" style="color: rgb(102, 0, 0);"New Prime Brokerage Model Emerging/span/b/h2br /a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_wM_OZdOMR_Y/SUvGhHYSIaI/AAAAAAAACrA/bkbv9SI9Bmo/s1600-h/Prime-Brokerage-Trends.jpg"img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 134px; height: 200px;" src="http://4.bp.blogspot.com/_wM_OZdOMR_Y/SUvGhHYSIaI/AAAAAAAACrA/bkbv9SI9Bmo/s200/Prime-Brokerage-Trends.jpg" alt="New Prime Brokerage Model Emerging" title="New Prime Brokerage Model Emerging" id="BLOGGER_PHOTO_ID_5281533260240920994" border="0" //aThe credit crisis and the subject of counter party risk is proving to be the final nail in the coffin for the hedge fund industry's single prime brokerage model. Funds of all sizes now demand multiple custodial relationships.br /br /The problem the high-cost-structure leading a href="http://primebrokerageguide.com"prime brokerage/a firms now face is that without the assurance of the captive single prime model the economics of servicing smaller funds no longer make sense. This reality combined with the primes' decreased risk tolerance means that we are seeing a mass exodus away from the top-tier primes. Anecdotal evidence suggests that these primes are now in the process of weeding out clients that manage less than $100 million or that do not generate annual revenues of at least $250,000. We are also witnessing primes becoming more selective about what type of funds they are willing to service. Funds whose strategies involve less liquid securities and/or high leverage are now finding the bar set much higher.br /br /This retrenchment by the leading span style="font-size: 100%;"a title="" style="font-family: arial;" href="http://richard-wilson.blogspot.com/2007/10/hedge-fund-prime-broker.html" description="Hedge fund prime broker, prime broker services for hedge funds, hedge funds prime broker, hedge fund prime brokers, prime brokerage hedge funds, fund prime brokerage, hedge fund prime broker services, prime broker, prime brokers" alt="prime brokers, prime brokerage"prime brokers/a/span raises the obvious questions - Who will fill the void and offer prime services to the lower end of the market? Who will provide the financing, stock loan, technology infrastructure etc. necessary for smaller funds to generate alpha?br /br /Before we answer this question let’s take a moment to think about why this smaller hedge fund segment is so key to the future success of the industry. It is no secret that size kills alpha. Many successful funds follow a familiar arc. They gain attention (and funds) by earning outsized returns, as they grow in size their primary strategy reaches capacity and they experience a leveling off of returns. If they are not lucky enough to find another successful strategy, returns will continue to suffer, capital will begin to flow out and ultimately investment talent will go in search of new opportunities. This regeneration process is vital to the health of the industry and for many investors, it is the promise of catching a smaller fund during this growth phase that motivates them to invest.br /br /Historically the group charged with picking up the crumbs left by the leading primes was a group known as the mini-primes. This term is rapidly becoming obsolete as the mini-primes now find themselves expanding their offerings to attract the funds that have been displaced. Two important differences remain: 1 - The mini’s still use the clearing services of their larger prime broker brethren, and 2 - more importantly, their cost-structures evolved in a way that allows them to offer prime services profitably at this lower end of the market. Interestingly we are also seeing a number of new entrants to this expanded segment of the prime brokerage industry. These are for the most part more traditional brokers who see an opportunity to increase the stickiness of their execution services, as well to develop new revenue streams, by building out a prime brokerage offering.br /br /Only time will tell who will be successful in this greatly altered landscape of prime brokerage. The winners will be the firms that understand that the new economics of prime brokerage demand a new industry infrastructure. This prime infrastructure will rely heavily on cost-effective technologies that can offer aggregated multi-prime reporting, as well as real-time views of critical data such as Pamp;L and Risk, right to the desktop of the hedge fund. This restructuring of the prime model will ensure the health of the industry by continuing to offer a relatively low barrier of entry to the all important small hedge fund segment.br /br /Article contributed by Peter Curley of a href="http://www.nirvanasolutions.com/web/"Nirvana Solutions/abr /br /h4Related to New Prime Brokerage Model Emergingbr //h4ullia alt="Hedge Fund Tracker Tool" href="http://richard-wilson.blogspot.com/2008/08/hedge-fund-tracker-tool.html" title="Track over 1,000 Leading Hedge Funds"Hedge Fund Tracker Tool/a/lilia description="hedge fund marketing" alt="hedge fund marketing" href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-marketing.html" title="Sharpen Your Hedge Fund Marketing Skills"Fund Marketing and Sales Advice /a/lilia href="http://richard-wilson.blogspot.com/2007/12/100-hedge-funds-to-watch.html"Top Hedge Fund Managers/a/lilia description="A collection of tools for hedge fund startups" alt="Hedge Fund Startup Tools" href="http://richard-wilson.blogspot.com/2008/09/hedge-fund-startup-tools-1-page-guide.html" title="Hedge Fund Startup Tools"Hedge Fund Startup Tools/a/li/ulTags: prime brokerage trends, prime brokerage news, prime brokerage, prime broker, prime brokers, California prime brokerage, new york prime brokerage, Dallas prime broker servicesdiv class="feedflare" a href="http://feedproxy.google.com/~f/richard-wilson-blog?a=mTrhhK3W"img src="http://feedproxy.google.com/~f/richard-wilson-blog?i=mTrhhK3W" border="0"/img/a a href="http://feedproxy.google.com/~f/richard-wilson-blog?a=MtgjPHXb"img src="http://feedproxy.google.com/~f/richard-wilson-blog?d=50" border="0"/img/a a href="http://feedproxy.google.com/~f/richard-wilson-blog?a=EExvxQJN"img src="http://feedproxy.google.com/~f/richard-wilson-blog?i=EExvxQJN" border="0"/img/a /divimg src="http://feedproxy.google.com/~r/richard-wilson-blog/~4/epLczgd2n8k" height="1" width="1"/

Top 3 Prime Brokerage Trends

Richard C. Wilson — Mon, 08 Dec 2008 00:15:06 +0000

h1 style="text-align: center;"bTop 3 Trendsbr //b/h1h2 style="text-align: center;"bTop 3 Prime Brokerage Trends/b/h2br /a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://www.mauronewmedia.com/images/ued/main-business-objectives.jpg"img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 228px; height: 162px;" src="http://www.mauronewmedia.com/images/ued/main-business-objectives.jpg" alt="" border="0" //aOver the last two years the mainstream media’s and general public’s interest in prime brokerage has rapidly grown. This is due to a number of factors including the struggle and failure many investment banks offering prime brokerage services including a alt="Lehman Prime Broker" href="http://primebrokerageguide.com/2008/05/lehman-prime-broker.html" title="Lehman Prime Broker"Lehman Brothers/a, mergers within the industry and widespread failures and redemption notices of hedge funds themselves.br /br /The top three trends affecting the prime brokerage industry right now are multi-prime brokerage relationships, limiting capital introduction services, and prime brokers acting as business partners to hedge fund managers.br /br /Multi-prime brokerage relationships used to be used by $5B+ a href="http://richard-wilson.blogspot.com/2008/03/hedge-funds.html"hedge funds/a whose large institutional clients demanded the practice as a risk management technique. In the past this was almost though of as unnecessary as no large investment banks offering prime services had collapsed. It was seen in the same light as a major economic superpower defaulting on their own investment notes. This year, in 2008 everything has changed, Lehman failed and many investment banks have struggled or sold off their prime brokerage services to other firms. This has lead to widespread migrations between prime brokerage service providers and a trend towards managing multi-a href="http://primebrokerageguide.com/"prime brokerage/a relationships for funds with over $500M in assets or even lower. Some firms as small as $5M are choosing to work with more than one prime brokerage firm from the very start as a few firms have reported shutting down due to assets being locked up within Lehman Brothers when they collapsed earlier this year.br /br /Another shift in the industry has been felt within the area of capital introduction services. Anyone offering these services lately has faced increased challenges of investors sitting on cash, poor market and overall industry performance along with increasingly frequent reports of hedge fund fraud. Prime brokerage firms are no effected by this, especially since they often take on and attempt to service more clients than most independent a href="http://richard-wilson.blogspot.com/"hedge fund/a marketers which are often referred to as third party marketers would. This had led to more selective capital introduction service offerings by prime brokerage firms and more frequent partnerships between prime brokerage firms and third party marketers in the industry.br /br /The third major trend affecting the prime brokerage business is that more firms in the space are positioning themselves as business partners. This is due to the commoditized nature of the industry and high level of competition for new business. Prime brokerage firms are now publishing white papers, offering business plan and marketing plan startup tools and holding workshops and networking events to help hedge fund managers connect with additional business partners and a alt="Hedge Fund Blogger.com: Hedge Fund Investors" href="http://richard-wilson.blogspot.com/2008/01/hedge-fund-investors.html" title="Hedge Fund Investors"investors/a.br /h4Related to Top 3 Prime Brokerage Trends:/h4ullia title="Hedge Fund Careers" href="http://richard-wilson.blogspot.com/2007/10/hedge-fund-career.html" description="Hedge Fund Careers" alt="Hedge Fund Careers"span style="font-size:100%;"/span/aa title="" style="font-family: arial;" href="http://richard-wilson.blogspot.com/2007/10/hedge-fund-prime-broker.html" description="Hedge fund prime broker, prime broker services for hedge funds, hedge funds prime broker, hedge fund prime brokers, prime brokerage hedge funds, fund prime brokerage, hedge fund prime broker services, prime broker, prime brokers" alt="prime brokers, prime brokerage"Hedge Fund Prime Brokers/a/lilia title="hedge fund associations" href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-associations.html" description="hedge fund associations" alt="hedge fund associations"span style="font-size:100%;"/span/aa title="Prime Brokerage Services" href="http://richard-wilson.blogspot.com/2008/04/prime-brokerage-services.html" description="Prime Brokerage Services" alt="Prime Brokerage Services"span style="font-size:100%;"/span/aa title="Prime Brokerage Services" href="http://richard-wilson.blogspot.com/2008/04/prime-brokerage-services.html" description="Prime Brokerage Services" alt="Prime Brokerage Services"Prime Brokerage Services/aa title="hedge fund associations" href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-associations.html" description="hedge fund associations" alt="hedge fund associations"/a /lilia description="Prime Brokerage, Prime Brokerage Services, Prime Brokerage Survey, FX prime brokerage, Currency Prime Brokerage, Synthetic Prime Brokerage" alt="Prime Brokerage" href="http://richard-wilson.blogspot.com/2008/06/prime-brokerage.html" title="Prime Brokerage"Prime Brokerage/a/lilia title="Hedge Fund Work" href="http://richard-wilson.blogspot.com/2008/06/hedge-fund-work.html" description="Hedge Fund Work, Hedge Fund Employers, Hedge Fund Employers, Work at a Hedge Fund, Hedge Funds Work" alt="Hedge Fund Work, Work at a hedge fund"Hedge Fund Work /a/lilia title="hedge fund recruiters" href="http://richard-wilson.blogspot.com/2008/03/hedge-fund-recruiters-recruitment.html" description="hedge fund recruiters" alt="hedge fund recruiters"Hedge Fund Recruiters /a/li/ulTags: Prime Brokerage News, Prime Brokerage Trends, Prime Broker Trends, Prime Broker News, Prime Broker Changes, Changes to Prime Brokerage Firms, Prime Brokerage, prime brokerdiv class="feedflare" a href="http://feeds.feedburner.com/~f/richard-wilson-blog?a=6jNPo"img src="http://feeds.feedburner.com/~f/richard-wilson-blog?i=6jNPo" border="0"/img/a a href="http://feeds.feedburner.com/~f/richard-wilson-blog?a=mV6zO"img src="http://feeds.feedburner.com/~f/richard-wilson-blog?i=mV6zO" border="0"/img/a a href="http://feeds.feedburner.com/~f/richard-wilson-blog?a=vUodo"img src="http://feeds.feedburner.com/~f/richard-wilson-blog?i=vUodo" border="0"/img/a /divimg src="http://feeds.feedburner.com/~r/richard-wilson-blog/~4/477763451" height="1" width="1"/

Ted Butler Says JP Morgan has Cleared the decks

Alex Stanczyk — Tue, 02 Dec 2008 21:49:47 +0000

Interesting read. Ted Butler is saying that all of the big long contract holders of silver have been intentionally squeezed out. COT Extremes By: Theodore Butler – Posted 2 December, 2008 It’s been a while since I have commented in detail about the Commitment of Traders Report (COT), since there have been other issues to be discussed. Plus, I [...]

Hedge Fund Lawsuit | Legal Action Against JP Morgan

Richard C. Wilson — Wed, 12 Nov 2008 17:27:57 +0000

Hedge Fund Lawsuits

Hedge Fund Lawsuit | Legal Actions

Quick Link: Hedge Fund Regulation Corner

(http://HedgeFundBlogger.com) Perhaps more dangerous than a wave of further redemptions in the hedge fund industry would be a wave of legal actions. With gates dropping as fast as assets at many hedge funds investors may be often left with locked-up assets, partial withdrawals, steep losses or all three. The last thing the industry needs is wave of 500+ lawsuits against hundreds of the top managers in the industry. Most hedge funds are relatively short on staff as it is and legal battles can keep managers from trading and raising capital as they should.

Here is a story excerpt about Amaranth and their lawsuit against JP Morgan and their prime brokerage division:

Remember the days when a hedge fund losing billions was news? Wise men would knot up their brows and wonder if hedge funds weren’t too loosely regulated or were creating some kind of systemic risk. After what we’ve been through in the past year that all seems like the good old days.

We were reminded of this today when we discovered that Amaranth’s lawsuit against JP Morgan Chase was still going on. It seems like a lifetime ago that the fund run by Nick Maounis imploded amid bad bets on natural gas. It was the trade that made Brian Hunter, Amaranth’s lead energy trader, famous. Amaranth lost $6 billion, collapsed, and sold its assets to JP Morgan and Citadel.

Afterwards, there were recriminations in all directions. Hunter is said to blame Maounis for not having the available cash to cover the margin calls. Maounis, for his part, felt he was done in by nefarious deeds at his prime broker, JP Morgan. Those feelings because a lawsuit, of course. Read more...

Read more regulation and law related articles with our Hedge Fund Regulation Corner.

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Hedge Fund Compliance Notes | White House | Hate Mail + New Regulations

Richard C. Wilson — Tue, 14 Oct 2008 16:12:23 +0000

Hedge Fund Compliance

Hedge Fund Compliance Notes

The recent financial crises has lead to many recent events for our team which runs HedgeFundBlogger.com. These have included a furry of proposals on how to further regulate hedge funds, blaming hedge funds for speculative practices and calls for great understanding of exactly what individual hedge funds are investing in. Being a blog which only discusses hedge fund related matters I have seen:

A member of the White House executive staff has recently joined the Hedge Fund Group (HFG)
Press Inquiries - many of which come down to questions on how hedge funds should be further regulated. My common response is that if it is done in a way where technology can be leveraged to apply the new regulatory procedures at the prime broker or hedge fund administrator level and if funds aren't required to disclose their portfolios than it might be readily accepted within the industry.
Hate mail and voicemails from a few individuals who believe that since I write HedgeFundBlogger.com I must run a hedge fund and am therefor a very evil person.

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Tags: Hedge Fund Compliance, Hedge Fund Regulation, Hedge Fund Regulations, regulation of hedge fund managers, are hedge funds regulated, hedge fund compliance

Singapore Prime Brokerage | Hedge Fund Prime Broker Trends in Singapore

Richard C. Wilson — Tue, 07 Oct 2008 02:13:15 +0000

Prime Brokerage Singapore

Article on Prime Brokerage in Singapore

Here is a recent post from our associated PrimeBrokerageGuide.com site:

When visitors arrive at Singapore's Changi Airport, they get both an immigration card and an application form for opening a hedge fund.

This was one of the jokes making the rounds in 2007. The fact is that hedge funds in Singapore were growing fast since 2006. According to an article dated Feb 2007 from eFinancialCareers, "prime brokers are in hiring mode" - Barclays Capital, Citigroup, Lehman Brothers, Morgan Stanley and UBS all hired for their Singapore prime brokerage operations in 2006.

By Nov 2007, Singapore serves as prime broking regional headquarters for Credit Suisse Group, Citigroup Inc and Barclays Capital plc, according to HedgeFund Intelligence. Citigroup and Morgan Stanley also opened Singapore prime brokerage offices in 2007, to service the fast-growing number of hedge funds in that market. Morgan Stanley, the top Singaporean prime broker by assets under management according to Eurekahedge, had previously been servicing its Singapore clients from Hong Kong.

As the growth of hedge funds slowed down due to the credit crisis, an article (download pdf) dated Feb 2008 pointed out that "their (referring to the prime brokers in Singapore) enthusiasm for growth is now waning". As reported on Oct 4^th, 2008, Morgan Stanley is looking at scaling back its prime-brokerage operation (detail). However others believe that "Asian hedge funds may be cold, but the Asian prime brokerage industry remains sizzling"(FINalternatives), indicated by Citi's move to add eight professionals to four Asia offices in Aug 2008, including transferring Danielle Vint to handle the prime brokerage's fixed-income desk in Singapore.

It is said that Citi has fired "the latest salvo in the prime brokerage talent wars in Asia". In Feb 2008, Merrill Lynch hired Aussie hedge fund CEO Jeffrey Levy for Asia prime brokerage, to join the firm's Singapore office. Levy's hire fills the hole left by Harvey Twomey, who left Merrill Lynch to join Deutsche Bank as head of global prime finance sales in Asia. Another source reports that in Sep 2008, Deutsche Bank has moved Chris Pagan (LinkedIn) from Hong Kong to Singapore in order to head prime brokerage for Southeast Asia.

by Yifei Huang

Interested in learning more about the hedge fund industry in Singapore? Please see our geographical guide on this region: Singapore Hedge Fund Guide.

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Asian Prime Broker Growth

Richard C. Wilson — Tue, 02 Sep 2008 12:40:17 +0000

Asian Prime Broker

Asian Prime Broker Growth Trend

Here is an interesting article about the growth of prime brokerage services in Asia. I didn't know that growth was so strong for these groups right now...

Citigroup expects the amount of assets serviced by its Asia Pacific prime brokerage arm to grow by more than 30 percent annually over the next three to five years, as more global hedge funds set up shop in the region.

Even with tumbling stock markets hammering Asia's hedge fund industry, many large international managers are doing more business in the region, drawn by its long-term potential, said Hannah Goodwin, head of Prime Finance, Asia Pacific for the U.S. banking giant.

"We're looking at a 30 to 50 percent growth every year," she told Reuters in an interview. "That's how aggressive we want to be with this business and how well we think this business is going to develop for us." Read more...

Free Daily Hedge Fund Newsletter

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Tags: Prime Brokerage in Asia, Asian Prime Broker, Singapore, Hong Kong, Beijing, Shanghai, China, Japan, Tokyo, Asia Prime Brokerage Services

The Spanish River Group Stephen Hansen

Richard C. Wilson — Mon, 01 Sep 2008 12:21:34 +0000

The Spanish River Group

Spanish River Group - Hedge Fund Profile

Another example of how even in a tough market when many funds are closing there are others launching hedge funds who come from large hedge fund shops with experience in the industry. Many times the launch of the hedge fund has been in the making for 1-2.5 years before doors are fully opened so current market conditions don't have a large effect on those taking a serious approach to the business.

The following piece on The Spanish River Group is being published as part of our daily effort to track hedge fund events in the industry. To review other hedge fund related announcements please see our Hedge Fund Tracker Tool.
___________________________________

Veteran hedge fund professional Stephen Hansen has gone into business for himself. Hansen, who has worked for fund-of-fund Common Sense Investment Management, Fullerton Capital and Drakes Landing, started The Spanish River Group in May.

Based in Florida, The Spanish River Group or TSRG is a long-short equity strategy with a bottom-up approach to stock picking. The hedge fund has no sector bias. Hansen characterized TRSG as using value and momentum investing.

TSRG launched with $900,000 in capital and has a 1.5% management fee and a 20% performance fee as well as a $250,000 minimum investment. Piedmont is the administrator. Harb, Levy & Weiland is the auditors. North Point Trading is the prime broker. Hansen said he wanted TRSG to amass $1 million in its first year. Read more...

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Tags: Stephen Hansen, Common Sense Investment Management, Fullerton Capital, Drakes Landing, Piedmont, Harb, Levy & Weiland, North Point Trading, The Spanish River Group (TSPRG)

Russian system is on borrowed time

Jason Corcoran — Wed, 18 Jun 2008 12:19:00 +0000

Financial News

Jason Corcoran in Moscow

16 June 2008

The Russian securities market has attracted substantial inflows from western investors in the past few years but the infrastructure to support the growth is only slowly catching up.

The average daily volume of transactions of Russian stocks stands at $6.1bn (€3.9bn), which includes $5bn traded on domestic stock exchanges with the remainder traded on foreign exchanges, according to investment bank Troika Dialog.

Investors have recognised some improvements over the past few years, but still regard dealing in Russian securities as a transaction, settlement and custody risk.

Most Russian investment offerings to non-Russian investors are domiciled in the Cayman Islands or in Guernsey, and often administered in Ireland. Global custodian State Street administers Prosperity Capital and Hermitage Capital, the two largest equity funds investing into Russia, from Dublin.

Damian McEvoy, associate vice-president at State Street’s subsidiary Investors Trust Europe, said: “Any initial scepticism about investing in such funds is unfounded, as all investors must go through rigorous anti-money laundering checks before being allowed to subscribe to these funds.

“But clearing and settlement standards have some way to go before reaching international benchmarks. Investors in Russian securities are typically only permitted to redeem on a monthly basis, and can sometimes have their redemption payments delayed due to the corresponding delay in the settlement of the underlying security sales.”

Hedge fund Hermitage, which has scaled down its activities in Moscow, has experienced considerable delays in the transfer of funds within Russia, the conversion of roubles into other currencies and the remittance of monies outside of Russia.

It said: “Delays may occur in the collection of dividends, proceeds of sales, redemption monies and other cash sums, possibly causing currency exchange loss, and some monies may not be received. In addition, due to the local postal and banking systems, it cannot be guaranteed that all entitlements attached to securities acquired by the fund, including in relation to dividends, can be realised.”

Most custodians point to the lack of a central depository, the numerous registrars and the need to register securities physically as the market’s most glaring inefficiencies.

Ramy Bourgi, head of emerging markets development at Société Générale Securities Services, said: “There is a record of the system working since the 1998 crash but it is not the most efficient from an operational point of view. It would benefit from a central depository and if there were not as many as 76 registrars.”

Legislation proposed by the Russian regulator two years ago to create a central depository was never passed in Russia’s parliament. Industry sources said settlement services provider Euroclear was approached by the regulator to be an adviser and create such a depository but that a final contract was never signed.

Stephen Cohen, chief executive of Troika Dialog’s hedge fund business, said: “It is a creaking system. Settlement can suffer from long delays when you use local registrars and their custody costs can be higher than in other markets.”

Troika’s $150m Cayman-registered Russian hedge fund uses Deutsche Bank as a prime broker and Deutsche Bank uses a network of sub-custodians in Russia.

A large amount of trading in Russian shares still occurs outside the country – in US or global depositary receipts with settlement in US dollars – but Russia is moving to repatriate this activity. That would require greater direct foreign investment in Russian equities, which has been erratic due to poor infrastructure and investor sentiment.

Some custodians, such as Northern Trust, have so far opted to steer clear of Russia because of the high proportion of captive non-state pension funds.

A Northern Trust spokeswoman said: “Russia is not a country in which we are really involved, and neither are we looking at it at the moment. There are apparently few pension fund assets in Russia. As serving pension funds – asset management and asset servicing – is one of the main parts of our business, there are fewer opportunities for Northern Trust. The main asset owners in Russia are the banks, and it is not a sector we are chasing at the moment.”

Acquisition of Russian banks by foreign organisations is seen increasingly as important for entering the competitive domestic custody market.

UniCredit is a leading sub-custodian in the Russian market through its ownership of International Moscow Bank, which was acquired by the Italian group’s Bank Austria Creditanstalt subsidiary in January 2007.

UniCredit, which also acquired Russian brokerage Aton Capital last year, sees Citigroup and ING as its main rivals.

Meanwhile Société Générale is hoping that increasing its stake in local bank Rosbank to 50% this year will allow it to become one of the dominant participants in domestic investor services and business coming in and out of Russia. The French bank paid $1.7bn for a 30% share of Rosbank, in addition to the 20% it already owns.

Bourgi said: “Russia is our top priority for Eastern Europe and Rosbank has a good domestic client base with $25bn in assets. Our job is to work with Rosbank to raise services to international standards and to serve existing clients.”

Bourgi, who joined SG in September last year with a mandate to develop the bank’s capability in emerging markets, said global custodians need a presence on the ground with local expertise.

“You cannot offer direct custody without being in the market. We go where clients want to go and Russia is an up-and-coming market,” he said.

Rosbank’s clients include many high-profile corporates that are beginning to branch out in international markets.

Consequently, Bourgi believes the domestic market is as attractive as the in-bound investor segment, if not more. He said: “When our Russian clients go international we will be able to capture their out-bound fund administration and custody needs.”

Information service Lipper Feri’s figures show that investments by European equity funds investing in the CEE – defined as Russia, Eastern Europe, the Baltic states and Turkey – rose from €5.3bn ($8.4bn) in 2002 to €38.6bn in July 2007. Much of that spurt is attributed to the growing interest in Russia.

While aspects of Russia’s capital markets have developed apace, its infrastructure is clearly lagging.

Russian system is on borrowed time

Jason Corcoran — Wed, 18 Jun 2008 12:19:00 +0000

Fun and games in hedge fund land (or what does it take to go to prison?)

John Hempton — Sun, 25 May 2008 05:01:00 +0000

Forgive me for a non-stock post. But it will cover the dubious goings on off Wall Street - and is fun.A while back I went looking for a new name for a fund. In passing I came accross New World Capital Management - the most intriguing hedge fund you h...