Finadium Briefing

A Primer on Prime Custody

Finadium
March 2010

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Prime Custody is well positioned to take advantage of major changes in the asset management industry. Large hedge funds are seeing themselves as general asset managers while traditional firms are expanding into leveraged investing. The last six months have seen a sharp increase in long/short and market neutral mutual fund assets. These trends point to an increased demand for the services of custodial banks.

This briefing encapsulates current thinking about the business of Prime Custody including the target market and operational considerations. We draw our conclusions from conversations with multiple custodians offering both Prime Custody and traditional custody to hedge funds and registered mutual funds. We also spoke with asset managers who have looked at or are using a mix of prime brokerage and custodial services. The appendices contain asset under management tables of US registered mutual funds that self-identify as long/short or market neutral.

This briefing should be read by custodians, prime brokers, hedge funds and asset managers with leveraged trading strategies and technology vendors in the custody/prime brokerage space. It provides an analysis of different types of Prime Custody services and factors for consideration when selecting a Prime Custody provider.

This briefing is 16 pages with 5 exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ The Idea of Prime Custody

■ Sizing the Market Opportunity

■ The Components of Prime Custody Services

■ Growth in 2010

■ About the Author

■ About Finadium

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