What should you expect from your prime broker?

Recent well publicised events in prime services have led to a tightening of access and a reduction in service particularly to smaller AUM or emerging hedge funds.

These events have reinforced the need for non-bank prime of prime firms to further expand their business models with a particular focus on the underserviced emerging hedge fund and active family office, to offer these firms a stable long-term partnership.

Andrew Bradshaw, Head of Prime Services at 26 Degrees Global Markets, provides his opinion on what to look for in a prime broking partner and the major trends that will impact the prime brokerage space into 2023.

What major trends have impacted the Tier 1 primes in 2022?

These really distil into two related points, which will continue to drive change into 2023. Firstly, the continuing fallout from Archegos Capital Management causing a contraction in prime services from tier 1 firms and secondly, the US Federal Reserve tightening risk frameworks in response to events such as Archegos with the clear intent of avoiding a broader market risk event.

We understand the impacts of these changes to the industry and have positioned 26 Degrees Global Markets as a full-service prime services provider to ‘fill the gap’ left by the Tier 1 firms with a particular focus on partnering with the emerging hedge fund segment.

What should emerging hedge funds be looking for in a Prime Broker?

Key considerations should be global market access, customisable reporting and integrated technology. At 26 Degrees Global Markets, we provide a full service offering which we can tailor to meet your needs. Critically, we use our own back-end technology, and this gives us a competitive advantage.

Boutique prime brokers such as 26 Degrees are ideally positioned to quickly examine their clients’ needs as they are free of both legacy technologies found in large investment banks and administrative bureaucracy that can be cripplingly slow. With our agile full service offering, we can tailor solutions to suit our client’s individual needs.

How does a good technology solution help?

For an emerging hedge fund, limiting time and expenditure on administrative items such as back-office reporting is critical. The legacy infrastructure hosted by tier 1 primes generally means their ability to generate custom solutions for clients is extremely limited and often they are hesitant to undertake development for new clients.

At 26 Degrees, our proprietary back-office systems are highly customisable, allowing us to build solutions to meet client’s needs in respect of data formatting, file types and file timing. Our integration experience enables us to assist clients with a smooth onboarding which as a result allows our clients to focus on what really matters.