The global buy-side – hedge funds, sovereign wealth funds, large insurers, pensions and some traditional asset managers – has increased its sophistication in recent years on funding and financing. Some firms have created portfolio finance desks that work to optimize collateral, reduce funding costs and assess counterparties, and a portion of those desks have the ability to determine what risk they want to keep on their own books or trade on-exchange vs. what risk their agent lenders or prime brokers will assume bilaterally. The more sophisticated these groups get, the more they can act like non-bank financial intermediaries with competitive implications for dealer funding and financing desks.
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