Counterparty risk exposure has been something of a boon for Deutsche Bank’s prime finance division in Asia.
Counterparty risk exposure has been something of a boon for Deutsche Bank’s prime finance division in Asia. Post ’08, hedge fund managers have been increasing the number of brokers they use to two, sometimes three, to diversify counterparty risk. All of which has helped the German bank double its market share in Asia over the last two years, reported Reuters recently. Hedge fund clients now using its prime finance services account for 20 per cent of the region’s total assets; approximately USD25billion if one refers to Eurekahedge, whose total AUM figure for Asian hedgies is USD125billion. Deutsche Bank’s growing market share would appear to be mirroring the way the region’s fund industry is rapidly evolving. David Murphy (pictured), co-head of Deutsche Asia prime finance unit, said that the firm’s Asia business “grew substantially” last year due partly to increasing its market share with locally managed funds.
To capitalize on that growth, Murphy said that he anticipated headcount to increase by 10 per cent this year: Prime finance currently employs 70 people in the region. Last year another European bank, UBS, embarked on an aggressive hiring strategy that saw its prime brokerage business hire 11 people; a sign that the dominance of US prime brokers Goldman Sachs and Morgan Stanley was beginning to face increased competition. Deutsche Bank’s USD50billion ETF business has also helped attract clients by offering a large number of products with which to hedge in various markets. Through a series of exclusive borrowing arrangements it has managed to increase its stock lending capabilities in the region by over 50 per cent. With more high profile funds expected to launch on the back of Morgan Sze’s eagerly anticipated Azentus Capital, competition to increase market share amongst Asia’s prime brokerages is likely to be intense this year.
