London, 27 September 2012 - Goldman
Sachs is the biggest prime broker in the global hedge funds
business, both by mandates and by client assets, according to
the first-ever global survey of the prime broking market
conducted by HedgeFund Intelligence.
The survey, covering an unprecedented amount of more than
$1.6 trillion of assets under management – close to
80% of the total industry – provides the biggest and
most detailed analysis of the global prime brokerage market
By mandates, it shows that Morgan Stanley is the second
biggest prime broker globally. But by assets, it shows Credit
Suisse in second place – boosted by its strength in
international markets, and particularly in Europe where it is
now by some distance the biggest player. And in third place
by assets is JP Morgan – which, like Credit Suisse,
got a big boost to its business following the financial
crisis of 2008, but more so in the US market.
Following the top four, the next two biggest players globally
are two other major European banks – UBS and
Deutsche Bank – which are neck and neck in fifth and
And rounding out the top 10 biggest players are four other
firms that are very closely matched – Citi, Barclays
Capital, Bank of America Merrill Lynch and Newedge, with the
latter’s strong position boosted overall by its
high market share in the managed futures sector (principal
clearing brokers for which are also counted for the purposes
of the survey).
Just outside the top 10 are BNP Paribas and SEB, the Swedish
bank, which has a dominant market share in the Scandinavian
Goldman’s overall lead is based largely on its
leadership of the market in the Americas, where it has been
challenged very strongly since 2008 by JP Morgan –
after the latter took over the old Bear Stearns PB business,
which had been a big player in the US.
In Europe, until 2008 the market had been heavily dominated
by two firms – Morgan Stanley, which was for many
years the clear market leader, followed by Goldman Sachs.
But, in Europe, it was Credit Suisse that was the biggest
beneficiary of the financial crisis in 2008, when many hedge
funds suddenly moved to appoint alternative PBs, and the
Swiss bank has gone on to extend its lead in Europe during
the past two years as well as expand its market share in the
US and Asia.
In Asia, the top five firms are very closely matched
– with Goldman and Morgan Stanley only slightly
ahead of the rest on the basis of business with Asian hedge
funds managed from outside the region (managed mainly from
the US or the UK). Within the region itself, Deutsche Bank is
currently the biggest prime broker for funds managed in Hong
Kong (the biggest market in Asia) as well as in Australia in
our latest AsiaHedge survey (May 2012).
The survey’s findings are based on the regional
surveys conducted by the HedgeFund Intelligence data team,
derived from information reported directly from hedge funds
across the globe to the database, supplemented by research on
new funds plus SEC filings. The numbers for mandates are
based on official prime brokers named by the funds, while the
numbers for assets are based in most cases on even splits of
fund AUMs among the named PBs – unless, as in a
minority of cases, the managers stipulated a different split.
Arguably, this methodology flatters certain firms and
understates the importance of others – such as
Barclays Capital, for instance, which is a big player overall
and particularly in fixed income and multi-strategy, but
which has concentrated more on building synthetic PB
relationships – where there are no official
mandates, and hence cannot be reflected in the figures here.
In addition to the regional variations, there are also some
significant variations in market share by strategy type
– with Morgan Stanley, for instance, still being
particularly strong in equities, while JP Morgan and Credit
Suisse are stronger in macro, fixed income and
multi-strategy, as well as Newedge in managed futures. These
variations are revealed in more detail in the annual
EuroHedge and AsiaHedge surveys.
Beyond the leading group of firms named, there is also a long
list of other firms that provide prime broking services
around the world – including some, such as HSBC,
which seem to be building market share rapidly this year. The
niche players outside the top 12 also feature some that have
a focus on certain market segments – such as
Fidelity Prime Services in US equities. There are others that
also have a regional focus, such as TD Securities, Scotia
Capital and RBC Capital Markets in Canada; or Bradesco and
Banco Itau in Latin America.
Neil Wilson, managing editor of HedgeFund Intelligence,
commented: "Post-2008, and the traumatic demise of Lehman
Brothers, the prime broking world has been in a dynamic state
of flux – and we expect this to persist as the
industry continues to grapple with a number of challenges. It
has been a tough time for prime brokers, with the cost of
finance rising and hedge funds in general running with less
leverage – and hence less balances with the Street.
All of which has served to further level the playing field
among the top prime brokers, and to create new opportunities
for various firms in several niche areas."
About HedgeFund Intelligence:
HedgeFund Intelligence is the leading provider of news,
analysis and performance data on the global hedge fund
industry. The company provides dedicated information on US,
European, Asian and African single-manager hedge funds as
well as on hedge fund investors worldwide.
For more information, please contact:
Del Jones / Toby Bates, Merlin PR