BNP Paribas established its global prime services division in 2003 and, in more recent years the firm has made a concerted effort to build out the business. In 2008, BNP Paribas acquired the prime brokerage business of Bank of America, establishing a US footprint and client base. In 2011, the firm embarked on a technology upgrade and invested in a new global prime brokerage platform with a view to increasing its business in Europe and Asia.
BNP Paribas now has 220 front office personnel spanning all three regions supporting a wide range of clients. BNP Paribas is a leading derivatives house with financing and cross margining being two of its core competencies.
“Typically, the clients we have experienced most success with are those requiring innovative financing or complex cross margining such as convertible bond funds, volatility funds, multi-strategy funds and event-driven funds. We have a sophisticated cross-margining platform and a lot of what we do centres around this,” comments Matt Pinnock, Head of Prime Services, Europe and Asia.
Both cash and synthetic prime brokerage services are provided to clients on the integrated platform including capital introduction, cross-margining, securities lending, risk management and cash management. With an A+ rated credit rating and strong balance sheet, BNP Paribas is proving to be a relevant counterpart for asset managers.
“Rather than focus on just reducing costs, for us Prime Services remains a continuous growth story. We are still investing, still hiring, and that’s an encouraging position to be in given today’s environment,” says Pinnock.
This is aided by the fact that the platform is relatively new technology with limited legacy constraints. The scalable and flexible infrastructure puts BNP Paribas in a strong position to adapt and evolve in this ever changing environment.
Cross-margining is part of the bank’s Prime Risk service and enables clients to gain relief for listed versus OTC instruments. In essence, the solution is geared towards helping managers closely manage margin requirements; which truly adds value, especially as the OTC market moves towards electronic trading and clearing through central counterparties.
“Risk management and the deployment of capital is something hedge fund managers may focus on closely. The benefit of cross-margining is we can continue to manage risk appropriately whilst providing margin relief to clients and enable them to utilise capital more effectively. We believe this is a key differentiator based on client feedback,” says Pinnock.
Additionally, BNP Paribas believes the changing regulatory environment will create both challenges and opportunities, according to Pinnock: “We firmly believe the Prime platform can be utilised to help clients prepare and deal with the new world of regulation. This includes AIFMD, increased collateral requirements and more structured solutions to manage risk and is an area we are spending an increased amount of time.”
Looking forward to the rest of the year, 2014 should present continued growth for BNP Paribas Prime Services, as they expand both their capabilities and staff. The market environment is evolving, and BNP Paribas hopes to make the most of the changes and grow market share.
On winning the Hedgeweek award this year, Pinnock concludes: “We’re very pleased with the recognition our Prime Services platform has received, and thank Hedgeweek readers for electing us as the Best European Prime Broker.