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 ever published.
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 sixth places.
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
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