Hedge Funds Expanding Overseas to Work With Prime Brokers

US-based hedge funds are working closely with prime brokers to enter new markets and expand internationally, says Monica Schulz, research analyst at TABB Group. According to the group's May chart of the month, which draws from and follows on TABB Group's Hedge Funds 2008: Perspectives on Prime Brokerage, Volatility and Expansion, nearly 40% of hedge funds plan to expand their investments into new regions over the next two years, Schultz says. Many of these hedge funds will support those expansions by opening new offices abroad.

She adds that most satellite offices will support only one or two business functions, 57% will have on-sight portfolio management and 43% will perform investment research. Prime brokers will be integral to providing back-office, market access, marketing and sales services to these locations, she says. The global expansion difficulties cited most frequently by hedge funds were: market expertise, regulatory requirements, data quality and establishing local broker relationships. Outside the US, 68% of hedge fund respondents said they planned to expand in Asia (ex-Japan).