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
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
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
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
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