[ I N D E P T H | P R I M E B R O K E R A G E ]
picking up the Best Prime Broker accolade in 2022 and an Overall Excellence Honour in 2023 - and 2024 was no different , beating the global average by 44 basis points .
The bank also highlights to us how “ as a global multi-asset class prime broker , we are structured to deliver the widest range of services regardless of strategy type or product complexity ”.
“ At Morgan Stanley prime brokerage , we continue to be focused on growing our market share with existing clients by leveraging our unique integrated investment bank and firm strategy to deliver holistically across advisory ,
“ The positive performance combined with markets trading at all-time highs and elevated gross leverage across the hedge fund client base has meant prime brokerage balances have reached peak levels .”
PENNY NOVICK , GLOBAL CO-HEAD OF PRIME BROKERAGE , MORGAN STANLEY
financing and sales and trading as well as our ability to tap into wealth and asset management channels to provide solutions to our hedge fund clients ,” explains Novick .
“ Additionally , we remain vigilant in working with emerging talent early and providing them differentiated resources across consulting capital introductions , talent management , technology and client service to help these new entrants launch their businesses successfully .” The big three can sometimes be passed over when it comes to media coverage of the prime brokerage sector , simply because of how far out in front they are with regards to market share – believed to be somewhere between
40-60 % depending on metrics and who you talk to – but their capabilities and service levels are not dropping and there are still billions of dollars being invested between them into the technology underpinning these units .
The challengers But the growth of the overall pie is also benefitting players outside of the top three , as the headline of this piece suggests .
Ever since the exits of Credit Suisse and Nomura from the business – along with Deutsche Bank ’ s sale to BNP Paribas back in 2019 – the prime brokerage landscape has been dramatically shaken up to the benefit of those remaining in the business .
Over the past year , each of the top 25 primes have increased their market share – according to Convergence – with 16 of those experiencing double-digit percentage growth .
Some of the larger funds who were contemplating their next move following an exit of their previous provider moved up the table to the big three – which they likely already had relationships with already – while others switched to some of the ascending players in the industry .
In addition to this – and somewhat because of these new funds - there has been a trend of the biggest prime brokers offboarding clients or limiting access for numerous funds , leading to many mid-tier PBs looking to move upstream and ambitiously add clients who have either fallen foul of exiting primes or been offboarded .
“ You had a flurry at the time , and then it slowed down , but we ' re still seeing trickles of that business two years later ,” explains Seibald , referring to the exits of other primes .
On the topic of offboarded clients , he adds : “ Emerging and mid-sized managers continue to be , for the most part , ignored / shunned by the bulge bracket prime brokers as the largest participants have been able to build their books with more desirable , larger revenue producing funds that found themselves in need of alternative banks following the demise / exit from the business of several of the largest players .
“ This has created an ongoing opportunity for mid-tier prime brokers , particularly those with broad asset class and geographical capabilities comparable to those of the bulge bracket banks . This is an ongoing pattern
66 // TheTRADE // Q3 2024