Positive outlook for prime brokerage business
Jefferies picked up the award for Best Prime Broker at the 2010 Hedgeweek Awards, and we are thankful for the recognition shown by our clients for outstanding service and the quality platform we have built over the past four years.
In 2006, Jefferies announced plans for the significant expansion of its prime brokerage unit to enhance the firm’s overall commitment to being a leading provider of financial services to hedge funds. The development of this group was a natural progression to complement Jefferies’ leading sales, trading and research platform in serving the institutional investor community.
We continue to see a vast opportunity to meet the needs of small and mid-sized hedge funds underserved by Wall Street, which is why we went about building this critical part of the business. Over the past two years, however, prime brokerage has experienced more changes than at any other time in my career.
The financial crisis has resulted in larger funds using multiple prime brokers, and large prime brokers have been focusing their efforts almost exclusively on USD1bn-plus funds. These trends have created a great opportunity for Jefferies. As a result, our business has grown nicely over the past two years and we now have more than 350 clients on our platform.
Our prime brokerage platform is largely focused on long/short equity funds. By offering a full-service integrated prime brokerage platform that includes research, securities lending, cutting-edge technology, competitive investment financing, access to an institutional trading desk, state of the art electronic trading, capital introduction and technology support, we can accommodate the business requirements of the most sophisticated hedge funds.
Additionally, we enable our clients to trade from anywhere in the world, while centralising all clearance, settlement, financial and administrative services and responsibilities. Our clients can also consolidate all transactions into a single account and take advantage of outstanding portfolio and risk reporting through a web-based platform.
In short, our firm’s full-service capabilities in equities, coupled with our robust prime brokerage platform, experienced staff and deep resources, have made Jefferies the prime broker of choice for growing and mid-sized hedge funds.
Going forward, the future of the prime brokerage business seems bright. We expect that the momentum that has returned to the industry in 2010 will continue over the next few years amid greater transparency for investors and lower levels of leverage. The industry has experienced its most difficult period in history, and has come through the crisis with greater risk controls, more appropriate operating leverage and a more balanced and improved business model.
Hedge funds will continue to attract some of the greatest talent on Wall Street and will likely be one of the top performing asset classes over the next 10 years. With prime brokers by the side of hedge funds, helping them clear their trades, introducing them to investors and providing the support they need, the hedge fund-prime broker relationship can only grow stronger.
Glen Dailey is head of Jefferies’ prime brokerage unit
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