[ I N D E P T H | P R I M E B R O K E R A G E ]
a number of very large multi strategy and or multi manager platforms that those investors are just more comfortable with . There ' s been a consolidation of where the assets are in the marketplace , and the biggest of the funds have gotten bigger .
“ We started to see a little bit of what I imagined was going to be the evolution of that market , which is a number of strong portfolio managers from those multi manager platforms coming out , launching their own funds . And we ' ve seen some significant launches this year in that space . We ' ll probably continue to see that trend .”
With two fewer major players in the space , the competition has been heating up and requires significant investment . Some of the banks behind the big three have been aggressively looking to capitalise on the continuing trend , with lots of positive noise around Bank of America , Citi , BNP Paribas and Barclays . It ’ s no easy thing to service these funds though , with significant investments , talent and scale required .
Outside of competing on capabilities , tech and the ability to service a range of strategies , one thing that shouldn ’ t be underestimated is the importance of client service . It ' s for this reason that the category is such an important mainstay of the Prime Brokerage Survey and while not the ‘ sexiest ’ attribute of a prime broker to talk about in this fast-moving world , it is critical none-the-less .
“ If you read some of the more recent Global Custodian surveys over the past few years , specifically as it relates to our business , one of the things that is stood out is the high level of client service ,” adds Steinberg . “ As all firms are looking to create more automation and create a stronger technological base and frankly , reduce overhead costs , something that ' s gotten lost in that is that prime brokerage has traditionally been a high level of touch client service model .
“ That ' s what drives clients ’ ability to get the services they need , not only from the prime broker , but from the broader bank itself . A lot of the clients that we ' re talking to - again , the big multi-platform , multi strategy funds - they want to have enough counterparties where they can invest how they want to when changes happen in regulation – whether it ' s around RWA or whether balance sheet changes for a specific bank or there ' s buying opportunities , but they also want to be really valuable to those counterparties as a whole and in total . And so , they want to be more to their
“ I think a lot of that money from the institutional allocators has been funnelled to a number of very large multi-strategy and or multi-manager platforms that those investors are just more comfortable with .”
AARON STEINBERG , HEAD OF PRIME SERVICES , BNY PERSHING
counterparties , and we want to be more for our clients .”
Travers concurs : “ With regards to the sell-side and prime brokerage specifically , we are all in client service on a daily basis ,” he says . “ The premise of what we do day in day out is to facilitate our clients ’ needs and enhance their business every day . Regarding the client service team , we find that the best way to differentiate our technology offering is to have best in class client service personnel .”
Challenges ahead ? It ’ s not all sunshine and rainbows in the prime brokerage world , however . Looming regulatory issues and the ever-increasing complexities of the business have led to constantly evolving risk management systems .
Among the major changes is the Basel III ‘ endgame ’ update , the widely anticipated capital requirements hike for Global Systemically Important Banks ( G-SIBs ). Last year , US regulators unveiled the new capital rules for lenders , with G-SIBs seeing an increase by an aggregate of 16 %.
The requirements align the US with Basel III standards which were agreed following the 2008 crisis with capital , leverage and liquidity requirements rolled out in the ensu-
68 // TheTRADE // Q3 2024