Bankers Love Hedge Funds for a Very Good Reason
Credit Suisse is trimming its prime brokerage business post-Archegos, but that’s just an opportunity for others on Wall Street to get more lucrative work.
Happy to take their business.
Photographer: Michele Limina/BloombergAs the aftershocks from the $10 billion implosion of Archegos Capital Management continue to reverberate, risk managers will be scrutinizing their equity financing desks more closely than ever. But with hedge funds rediscovering their mojo in recent months, the prime brokerage units catering to their needs are far too lucrative for investment banks to curtail their activities.
Unsurprisingly, the business of providing stock lending, leverage and other specialist prime services is dominated by U.S. investment banks. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. serve almost half of the market, according to figures compiled by research firm Green Street and Bloomberg Intelligence. Credit Suisse, the biggest prime brokerage loser from the Bill Hwang debacle, ranked joint fourth in the league tables, alongside BNP Paribas SA, which has spent the past year and a half integrating Deutsche Bank AG’s unit after agreeing to purchase it in 2019.