Bloomberg reported Tuesday questions concerning the logic behind some of the US’s largest custodial banks and their decision to focus primarily on mutual funds and pension plans instead of cashing in on hedge fund benefits.
The article calls banks such as Bank of New York, State Street Corp., Mellon Financial Corp. and Northern Trust Corp. a “natural fit for hedge funds” because of the trillions of dollars they safeguard in stocks and bonds – the securities hedge fund managers are primed to borrow for trading.
Instead, as the article points out, the banks let Wall Street firms, such as Goldman Sachs Group Inc., divvy up the some $5.5 billion in annual stock-lending fees as hedge fund assets continue to explode, doubling during the past six years alone.
And while the banks scurry to catch up to the point Wall Street firms have been enjoying for years by offering hedge funds record-keeping services, some experts question whether custodial banks had the ability or wherewithal to adapt quickly enough to benefit from hedge funds and financing their trades.