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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) | |||