Prime brokerage is the generic name for a package of services offered by a firm, such as an investment bank, to institutional clients, such as hedge funds, mutual funds, and other money managers.

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What is Prime Brokerage:

Prime brokerage is the generic name for a package of services offered by a firm, such as an investment bank, to institutional clients, such as hedge funds, mutual funds, and other money managers.

Prime brokerage grew from the need to process and control the trades of hedge funds and other firms more efficiently. Today, the services provided by prime brokers include trade execution, settlement and custody, financing, lending securities for a short sale, and capital introductions. Prime broking itself isn't just highly profitable, but also offers a route to sell additional services to hedge funds and other clients.

A cursory glance at the website of the leading investment banks indicates that prime brokerage now represents a key offering of these banks.

But the industry faces some challenges. As has been well documented, the global financial crisis resulted in the failure of a number of significant financial institutions, while others required government intervention to keep them afloat. Prime brokers were at the center of the turmoil, which exposed the risks that hedge funds face when their assets are rehypothecated. As funds tried to reclaim rehypothecated assets, they discovered they were in a “queue” of general creditors.

Why it is important:

Reaction to the crisis has shaken up the prime brokerage business. Greater focus has been placed on the quality of services offered by prime brokers, with clients seeking improved transparency and enhanced internal risk management controls. Many clients are also keen to separate the custody of their assets from the banks that lend them cash and securities. As a result, the business has been distributed among a wider group of service providers, and there has been a redistribution of market share from some established-prime brokers to well-positioned newcomers.

If you work in investment banking or asset management, you must have a solid overview of the prime brokerage business, the major services offered by prime brokers, and the prevailing trends in the industry.

What will you learn:

  1. Basics of Prime Brokerage
  2. Prime Brokerage Services
  3. Building a prime brokerage business
  4. Repos and security Lending
  5. New opportunities and sources of growth
  6. Identifying the right prime broker
  7. Efficiency and special considerations
  8. Ancillary Services

Target audience:

Recruits to the investment banking and hedge fund industries, as well as other professionals looking to further their understanding of prime brokerage services.

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