Global Custodian Prime Brokerage Survey 2012 Published

Global Custodian Prime Brokerage Survey 2012 Published

The results of the 19th annual Global Custodian survey of the perceptions of prime brokers by their hedge fund clients are published today.

Judging by the number of "leading client" responses received, the industry continues to be dominated in terms of balances and revenues by the top nine investment banksnamely, Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and UBS. The results are summarized in Table 1. Further details can be found in Appendix 1.

Table 1: How Leading Hedge Funds Rated Their Prime Brokers

* Scores were weighted, normalized, outliers removed, see Further Notes on Methodology for additional information

However, this year also sees Barclays Capital reap the rewards of substantial investment in recent years, and start to fulfill its global potential, with a 60% surge in respondent numbers. BNP Paribas has doubled its rate of response and also secures a global rating for the first time. The results are summarized in Table 2. Further details can be found in Appendix 2. Additionally, Citi and Newedge Group both saw improvement to their average scores (both unweighted and weighted) since last year. A comparison of the overall weighted and unweighted scores of the global providers can be found in Table 3.

Table 2: How All Hedge Fund Respondents Rated Their Prime Brokers

*Scores were weighted, normalized, outliers removed, see Further Notes on Methodology for additional information

Table 3: Global Prime Brokers: 2012 vs. 2011 Unweighted and Weighted Average Scores

However, it is the ability to win business from the largest and most sophisticated hedge fund managers, and satisfy their high expectations that is the mark of excellence in the prime brokerage industry. It is to measure the success of prime brokers in achieving these goals that the 2012 survey includes for the first time a formal rating based on scores from "leading clients."

In our judgment, the "leading client" category is now the "gold standard" of the survey, by which our readers and participants may gauge the prime brokers that are best servicing the needs of the most demanding and knowledgeable hedge funds.

To qualify as a "leading client," a hedge fund manager must be a classic hedge fund (i.e. not a fund of funds, managed account platform or long-only asset manager pursuing alternative strategies), manage at least $1 billion and place significant amounts of business with at least two prime brokers. Qualifying respondents must also be widely recognized within the hedge fund industry as an outstanding manager.

"Leading client categories are an established feature of other surveys published by Global Custodian," explains Dominic Hobson, editor in chief of Global Custodian. "As in our other surveys, this group of top-tier respondents provide the truest benchmark of excellence in this industry. A prime broker that can win business and high scores from clients of this caliber deserves to be considered among the best this industry can offer."

Global Custodian surveys editor Allison Cayse thanked the thousands of hedge fund managers, fund managers and funds of funds managers that completed a long and detailed questionnaire. "In response to feedback from hedge fund managers and prime brokers, we made a considerable number of changes to the questionnaire this year, both to shorten the number of questions and to make the questions more relevant, but respondents still had to answer 78 questions spread across 12 separate service areas," she says. "So I would like to take this opportunity to thank nearly 3,500 individuals who took the time and trouble to complete a response. This is very much their survey, rather than ours."

Notes

1. To be considered for a rating from "leading clients," a prime broker must have received at least 45 responses from this client group. On that basis, Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and UBS qualified for ratings.
2. "Leading clients" are a group of 237 separate fund managers, who submitted a total of 851 separate assessments of prime brokers.
3. In total, 3,473 authenticated responses were received on behalf of 40 separate prime brokers. The additional prime brokers that qualified for ratings from this group are BMO Capital Markets, BNP Paribas Prime Brokerage, Cantor Prime Services, CIBC World Markets, Concept Capital, Fidelity Prime Services, Jefferies & Company, Newedge Group, Pershing Prime Services (BNY Mellon) and TD Securities.
4. Full details of the scores, on an unweighted as well as a weighted, normalized and outlier-free basis, are available to subscribers here.
5. Members of the press interested in seeing a full copy of the results should contact Surveys Editor Allison Cayse directly at the address below for a watermarked PDF.

Contacts:

Dominic Hobson, Editor in Chief, at dhobson@globalcustodian.com or +44 (0) 207 228 3013

Allison Cayse, Surveys Editor, at acayse@globalcustodian.com or +1 513 574 0220

Appendix 1

Leading Client Score Calculations

*Weightings are derived according to the size and sophistication of respondents and for performance on questions named as important in each service area by respondents

**Outliers are defined as responses of straight 7s and straight 1s and/or 2s

***N/As replaced with average score of 5.41

****Weighted, normalized, outliers removed

Appendix 2

All Hedge Fund Respondents Score Calculations

*Weightings are derived according to the size and sophistication of respondents and for performance on questions named as important in each service area by respondents

**Outliers are defined as responses of straight 7s and straight 1s and/or 2s

***N/As replaced with average score of 5.41

****Weighted, normalized, outliers removed