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Survey: Hedge fund managers dissatisfied with prime brokers

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Many hedge fund and CTA managers express dissatisfaction with their prime brokers’ inability to offer technologies to help them more effectively manage risk and assist them with managing and growing their business, new research reveals.

I.A. Englander Managed Accounts & Prime Services (IAE MA&PS), discloses this finding in a survey that polled hedge fund managers with $500 million or less in assets under management (AUM). 

The survey finds that technology/reporting is the leading service (35%) that attracts hedge fund managers to their prime broker, followed by operations coverage/competency (30%) and execution rates (25%). s

More than half (55%) of those surveyed say their prime broker doesn’t offer the appropriate technology to help raise capital for their firms, compared with 30% of the firms who say their prime broker provides this service.  In addition, while nearly all hedge fund managers believe that capital introduction plays an important role when selecting a prime broker, most hedge fund managers are dissatisfied with their current level of capital introductions. 

On a scale from one to five, with five as the highest and one as the lowest in terms of satisfaction, hedge fund managers gave it a rating of 2.2. 

Other highlights of the survey include:

  • The majority of the survey respondents (75%) use managed account programs, with more than half (55%) noting their firms have benefited from these types of programs.
  • On a scale ranging from one to five, with five as the highest and one as the lowest, most of the firms experience an above-average level of satisfaction (a 3.6 rating with their managed account program).
  • Forty-three percent of the hedge fund managers cited relinquishing transparency to investors as the primary reason their firms do not use managed account programs. 
  • Half of the firms report no loss in scale of their trading strategies and counterparty relationships due to using managed account programs, compared with 10% which do experience the problem.
  • Only about one-third of the respondents use a multi-prime structure. The remainder used a single-prime broker.


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