Prime broker: Difference between revisions
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A prime broker is the business division of an [[Investment Bank]] that looks after [[hedge fund]]s. It usually provides the following services: | A prime broker is the business division of an [[Investment Bank]] that looks after [[hedge fund]]s. | ||
*'''Consulting''': Helping a nascent hedge | |||
*'''[[Custody]]''': looking after the | ===What prime brokers do=== | ||
It usually provides the following services: | |||
*'''Consulting''': Helping a nascent {{tag|hedge fund}} get off the ground: setting it up, finding offices, hiring people, engaging lawyers, recommending (cough) [[prime broker]]s, and [[capital introduction]] - the tricky business of putting investors and investment managers together without looking like it was anything to do with you. | |||
*'''[[Custody]]''': looking after the {{tag|hedge fund}}'s "long" investment portfolio | |||
*'''Bank accounts''': running a multicurrency cash account | *'''Bank accounts''': running a multicurrency cash account | ||
*'''Settlement facility''': lending the hedge fund the assets it needs to settle [[short sale]]s, and lending it the money it needs to buy assets. | *'''Settlement facility''': lending the {{tag|hedge fund}} the assets it needs to settle [[short sale]]s, and lending it the money it needs to buy assets. | ||
*'''[[Synthetic prime brokerage]]''':providing the hedge fund with exposure to assets through derivatives (as an alternative to the hedge fund buying them outright). Often in the trade called "[[CFD]]"s. This may involve accepting [[give-up]]s from other [[executing broker]]s. | *'''[[Synthetic prime brokerage]]''':providing the {{tag|hedge fund}} with exposure to assets through derivatives (as an alternative to the hedge fund buying them outright). Often in the trade called "[[CFD]]"s. This may involve accepting [[give-up]]s from other [[executing broker]]s. | ||
*''' | *'''[[Swap]]s and {{tag|ETD}}'''': Providing general exposure to swaps, futures, options and that sort of thing. | ||
===What prime brokers don't do=== | |||
*'''Act as {{tag|PB administrator}}''': While they look after assets, prime brokers don't calculate {{tag|NAV}} (that's the {{tag|PB administrator}}'s job) | |||
*'''Act as {{aifmdprov|depositary}}: Nor do they act as an official {{aifmdprov|depositary}} for {{tag|AIFMD}} purposes (though they may get delegated the safekeeping rols and may act as a {{aifmdprov|depo-lite}}) | |||
*'''Act as an [[executing broker]]''': They don't themselves work equity orders for their clients (though their compadres across the [[Chinese wall]] in the equities trading division at the same investment bank almost certainly will) | |||
Revision as of 15:43, 3 February 2016
A prime broker is the business division of an Investment Bank that looks after hedge funds.
What prime brokers do
It usually provides the following services:
- Consulting: Helping a nascent hedge fund get off the ground: setting it up, finding offices, hiring people, engaging lawyers, recommending (cough) prime brokers, and capital introduction - the tricky business of putting investors and investment managers together without looking like it was anything to do with you.
- Custody: looking after the hedge fund's "long" investment portfolio
- Bank accounts: running a multicurrency cash account
- Settlement facility: lending the hedge fund the assets it needs to settle short sales, and lending it the money it needs to buy assets.
- Synthetic prime brokerage:providing the hedge fund with exposure to assets through derivatives (as an alternative to the hedge fund buying them outright). Often in the trade called "CFD"s. This may involve accepting give-ups from other executing brokers.
- Swaps and ETD': Providing general exposure to swaps, futures, options and that sort of thing.
What prime brokers don't do
- Act as PB administrator: While they look after assets, prime brokers don't calculate NAV (that's the PB administrator's job)
- Act as depositary: Nor do they act as an official depositary for AIFMD purposes (though they may get delegated the safekeeping rols and may act as a depo-lite)
- Act as an executing broker: They don't themselves work equity orders for their clients (though their compadres across the Chinese wall in the equities trading division at the same investment bank almost certainly will)
See also/Not to be confused with
See especially in the context of AIFMD: Prime broker - AIFMD Provision.