As regulatory measures such as Basel III would impact network of market and counterparty relationship, hedge funds need to consider the critical drivers of change affecting their prime brokers to better adapt to the evolving business environment, notes a JPMorgan paper.
JPMorgan in its paper titled “Leveraging the Leverage Ratio” notes a more resilient banking and financial system will ultimately benefit hedge funds as counterparties will be better capitalized, with stronger balance sheets and will operate with more robust financing models than before the financial crisis.
Change drivers in prime brokerage funding model
According to the JP Morgan paper, the three elements of Basel III viz.: enhancing bank capitalization, reducing bank liquidity risk and constraining bank leverage will have potential...
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