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Bank of America Merrill Lynch
This is not the sort of outcome the BAML prime brokerage group enjoyed 12 months ago. Scores and comments indicate clients still like the parentage(“ Counterparty has great credit quality”), and the score for asset safety is correspondingly high. Yet only in listed derivatives is BAML able to conjure a comparable degree of enthusiasm. Nevertheless, BAML continues to impress in trading and execution – although for some reason operations have failed to keep pace.“ Operations services [ sic ] is good,” says a client, but the average score is bad. One client has the“ impression that more European equities trades fail than at other PBs.” Sustaining clients’ short positions is less problematic. In pre-crisis days, Merrill Lynch earned a formidable reputation in stock borrowing, thanks to a high rate of internalisation that kept supply steady, and that strength has not wilted. Even now, access to streams of lendable assets minimises recalls, finds hard-to-borrows and supports term transactions. To these traditional strengths, BAML has added a commendable degree of transparency into pricing. So it is not surprising to find the bank top-scoring in securities borrowing and lending. However, across all the associated equity and synthetic financing areas – in Delta 1, swaps and financing and foreign exchange prime brokerage – there is less positive momentum. Clients want to see better-integrated financing across the asset classes, including more valuable cross-margining and cross-netting opportunities, although these are not fields in which prime brokers are ever likely to satisfy clients all of the time. One BAML client concedes as much.“ OTC / listed commodity option [ s ] are one of the product [ s ] that PBs generally perform less satisfactorily,” he writes.“ They cannot offer cross-margining with overall portfolio; strategic parting of legs [ is ] not married with howit – should-be margin; mark-to-market and delta data delivery are not robust. Most of bulk matching and settlement platform do not support this product as well.” As it happens, collecting and delivering data for cross-margining purposes is not the only field in which clients would like to see BAML invest. The bank did recently update its portal to provide managers with readier access to data across futures as well as equities and fixed income, but clearly it has not yet reached every client.“ Portal is awful,” says a client.“ One of the worst portals in the financial services sector.” The client servicing model, which hinges on a global and multi-asset class team that works together across 65 markets mainly from New York, London and Asia, does win plaudits. An individual is namechecked, because he is“ very good at his job, always helping out in any way possible.” Another respondent is experiencing“ excellent client service coverage from BAML.” The team as a whole earns praise for doing“ an amazing job” at a time of considerable turnover within the BAML prime brokerage group – an issue evident last year that has persisted into 2018. Capital introductions, a good area for BAML in 2017, has turned sour this year for exactly that reason.“ Turnover within team has been exceptionally high,” explains a respondent. Inevitably – perceptions tend to divide neatly along a line that separates the successful capital raisers from the unsuccessful – not everyone agrees with the average verdict. One client insists the BAML capital introductions team is still“ top tier.” Consulting, where the bank has maintained a service to start-ups as well as established managers, is another area where the scoring reflects perceptions of turnover.
18 %
43 %
By size
39 %
Weighted average scores
PROFILE OF RESPONDENTS
Large Medium Small
Weighted average scores by service area Service area
25 %
22 %
By location
2016 2017 2018 5.63 5.65 5.10
Weighted average score
Capital introductions 5.00-6.9 %
53 %
Americas Europe and Middle East Asia
+/- the global average
Client service 5.00-16.8 % Consulting 4.78-18.4 % Operations 4.62-22.6 % Technology 4.90-12.5 % Product development 4.02-26.2 % Risk management 4.97-10.8 % Asset safety 5.23-8.8 % Sales and marketing 5.26-14.3 % Trading and execution 5.34-8.7 % Delta 1, swaps and financing 4.97-13.2 % Stock borrowing and lending 5.51-7.8 % Foreign exchange prime brokerage 4.93-13.0 % Fixed income 4.43-23.2 % OTC clearing 5.06-13.6 % Listed derivatives 5.99 1.7 % Total 5.10-12.1 %
The Hedge Fund Annual 2018 globalcustodian. com 75