November 2017

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With European hedge funds holding over US$543 billion in assets, European prime brokers continue to run vital and productive businesses. This is especially true as, following reorganization of their balance sheets, these business divisions have growth opportunities that warrant capital allocations if senior management is receptive.

This Finadium research report is a survey of European prime brokers’ thinking towards capital and clients. We investigate how much prime brokers are aware of their balance sheet requirements and whether this is increasing, decreasing or staying the same. While the decisions of individual firms may not often be noticed, the collective implication for European equity and bond markets can be substantial as more or less leveraged capital is invested.

Since 2010, the message from prime brokers has been that some clients are more desirable, which was true to an extent even before the financial crisis. When balance sheet is factored in the equation, there are apparent benefits to netting and types of business that each client brings to the table. We wanted to hear from our survey participants: how do they determine what makes for a good prime services client now? Is there a particular profile they are looking for?

This report has been written for European market participants, including: prime brokers to evaluate their capital and client decision making against peers; hedge funds and other prime users to better understand the behavior and positioning of their services providers; and vendors to address possible bank purchasing and product development needs.

Table of Contents

  • Executive Summary
  • Growth Opportunities Following Balance Sheet Retrenchment
  • Capital Management
  • Client Relationships
  • Measuring Balance Sheet Utilization
    • Best Practices for Balance Sheet Utilization at European and US Prime Brokers
  • The Future of European Prime Brokerage
  • About the Author
  • About Finadium LLC

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