Basel III forcing prime broker rethink says survey

Three quarters of fund managers are being forced to change the way they interact with their prime brokers in light of Basel III, a survey has shown.

By Paul Walsh(2147491592)

Three quarters of fund managers are being forced to change the way they interact with their prime brokers in light of Basel III, a survey has shown.

According to a survey by the Alternative Investment Management Association (AIMA), 75% of fund managers have been asked to change how they do business with their prime brokers. More than 67% of those surveyed said they have cut the amount of cash they keep on brokers’ balance sheets.

The survey also revealed that in the last two years, alternative asset managers have either maintained or increased the number of prime brokers they use, with an average of four financing relationships.

Additionally, only 20% of fund managers had a clear understanding of how their prime brokers calculate their worth in terms of revenue relative to balance sheet impacts, commonly referred to as RoA.

“There is no doubt that the Basel III banking standards are having a significant impact on hedge funds and other alternative asset managers,” said Jack Inglis, CEO of AIMA.

“Financing costs are rising and the fund manager/prime broker relationship is changing fundamentally.”

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