Merrill Lynch this month issued a surprisingly candid assessment of the advantages hedge funds can achieve by using multiple prime brokers. Prime brokers with sole mandates, particularly the top-tier prime brokers, may charge a premium for their services, the reports states. A fund can assert pricing pressure on its initial prime by introducing additional prime brokers.
Three-quarters of hedge funds with more than $1 billion in assets use at least two prime brokers, according to a Greenwich Associates study commissioned on behalf of Merrill Lynch last year. The same study showed that more than 35% of those funds