THE NEXT GENERATION PRIME BROKER
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Overview: As the hedge fund industry continues its rapid growth and assets pour in at record levels amid rising institutional allocations, industry dynamics are changing significantly. Recent high-profile blow-ups have led to calls for increased operational scrutiny and transparency of investment processes. Managers have been forced to upgrade their operations and accounting infrastructures amidst intense cost pressures. Competition for investors has moved managers away from traditional investments into emerging markets and over-the-counter products which has created even more of a need for tight operational control and comprehensive infrastructure. As these market dynamics change, prime brokers are realizing they have to adapt their business models if they want to sustain the high level of profitability their parent investment banks have grown accustomed to. However, as cost pressures and infrastructure demands intensify, more and more managers are choosing to maintain multiple prime broker relationships to get best access, competitive pricing, and, to a lesser extent, non-traditional services such as fund administration and comprehensive technology.