Prime broker

From The Jolly Contrarian
Jump to navigation Jump to search

A prime broker is the business division of an Investment Bank that looks after hedge funds.

What prime brokers do

Prime brokers — fondly known in the trade as PBs — usually provide the following services:

Prime brokers often also have a consulting arm which helps a nascent hedge funds get off the ground: setting it up, finding offices, hiring people, engaging lawyers, recommending (cough) prime brokers, and capital introduction.

Why prime brokers do it

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: PBs, which tend to be situated in London, or New York, generally cannot act an official depositary for AIFMD purposes (though they may get delegated the safekeeping role 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)

Not to be confused with

See especially in the context of AIFMD: Prime broker - AIFMD Provision.