Prime Brokers Expect Big Changes in Hedge fund Industry

A survey of the prime brokering industry by Ernst & Young throws up new insights into the challenges it faces due to the changing dynamics in the hedge fund industry and regulatory changes.

Tougher market conditions

The industry is facing headwinds from the increasing tendency of clients to diversify their prime brokers from one to many (‘multi-prime’), as well as a pressure on fee levels.

The headache of counter-party risk has led most hedge funds to distribute their exposure among a larger number of prime brokers. The report says that...