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demonstrated how risks associated with leverage , concentration and interconnectedness can rapidly develop – highlighting the need for more work to be done to monitor risks related to derivatives and leverage . According to multiple sources , that work is most definitely now being done .
Though not confirmed or addressed by any of the top tier , there is widespread talk of some offboarding clients or limiting access for numerous funds . The renewed focus on risk management and diversification amongst their client portfolios has left some funds in the market for a new partner , while others may be nervously observing the situation .
“ We keep hearing over and over again from clients that they ' re concerned with whether the banks will still be there ,” says Chris Pento , CEO , Clear Street . “ Unless you ’ re one of the top 100 or 200 hedge funds , or funds that can pay millions of dollars a year , then you ’ re worried about viability of where you ’ re at . So they ' re looking for alternatives :
alternative funding solutions , execution solutions , and to someone who can think about their business in a global way .”
The accumulative $ 10 billion losses from Archegos turned out – unsurprisingly – to be too big to ignore . The occurrence has altered the way primes assess risk , brought up questions around oversight , transparency and leverage . In addition , only time will tell if the short squeeze during the memestock saga was episodic or a trend .
“ Any time you have large institutions , prime brokers and banks looking at what it means to apply risk to their client base , it ' s inevitably going to have an effect whereby folks are just going to say ‘ what do we really want out of our client base ?’,” says Mark McGoldrick , co-head of prime service at JonesTrading .
“ The natural progression here is that you ' ve seen a shift where folks are targeting different kinds of funds and going after funds that maybe they hadn ' t gone after otherwise , and thus again , creating that gap for the start-up and emerging managers to get resources allocated to them from a trading , clearing ,
54 // TheTRADE // Q4 2022