As the dust settles on JPMorgan's purchase of a
controlling stake in Highbridge, and as attention switches to
Lehman Brothers and GLG, it is becoming clear that there is
more to the decision by big investment banks to buy into hedge
funds than meets the eye. The obvious attraction for banks is
the chance to offer their clients quality hedge fund products
that they would struggle to build internally.
However, the big banks may be less willing to admit that
another factor drawing them into hedge fund purchases is the
desire to boost their fee income - and not just from
performance fees earned by the funds - but also from the huge
commissions paid by hedge funds to the investment banks.
While the traditional investment institutions are squeezing
the banks on their equity commissions, many of the bigger hedge
funds actively seek to pay top dollar because they want to