Prime Brokerage: One Service to Bind Them All

Celent Communications estimates that IT Spending by Prime Brokers will reach well over US$1.2 billion by 2006, as they commit themselves to STP and push towards meeting the impending deadline for the industry-wide T+1 initiative.

In a new report, entitled Prime Brokerage: One Service to Bind Them All,Celent examines the current state of the prime brokerage market, looking at the explosive growth of the hedge fund industry and the potential for growth of prime brokers in the US, Europe, and Asia-Pacific.

The days of equating prime brokerage services to simple back-office operations are long gone. Instead, prime brokers now support all aspects of investment management and transactions, ranging from capital formation and clearing and settlement to securities lending, financing, and technology services.

With hedge funds increasingly becoming the investment vehicle of choice for sophisticated investors globally, large prime brokers have also expanded beyond their national boundaries to service the leading hedge funds.

According to Sang Lee, Analyst at Celent, "The globalization of hedge funds, coupled with their propensity to use a diverse mixture of financial instruments, has propelled prime brokers to increase their service offerings to better support the sophisticated investment strategies of the leading hedge funds."

He adds that "As the financial services industry marches towards achieving straight through processing (STP), it has become vital for prime brokers to integrate their disparate systems so that they can continue to provide reliable services to the hedge fund industry."