Prime Brokerage Flows
Prime Brokerage Industry Changes
Here is a short excerpt from Dealbook on the recent dramatic changes in the industry which have been reshaping the competitive landscape of this space:The prime brokerage landscape seems to be changing amid the shake-up on Wall Street, according to Investment Dealers’ Digest. Two major prime brokers — Bear Stearns and Lehman Brothers — are gone, while two more — Morgan Stanley and Goldman Sachs — have had hundreds of clients pull their money out of their prime brokerage units.
The result has been a boom for rivals like Deutsche Bank and Credit Suisse, as well as independent prime brokers, which have all fought for years to lure prime brokerage clients away from their big rivals.
The prime brokerage units inside the big investment banks provide financing, clearing and settlement services for hedge funds, as well as for other investors. These units hold on to billions of dollars of their investors’ cash and help execute their trading strategy.
But the demise of Lehman Brothers last month shook up this lucrative business. Several hedge funds that had counted on Lehman’s prime brokerage unit were stunned to find out that their collateral was frozen and that they could not get access to their money to make trades. Some that depended on Lehman as their sole prime broker remain paralyzed. Read more...
