Morgan Stanley, Goldman Sachs Tied For 'Top' Prime BrokerVW Staff
Preqin’s global survey of over 100 hedge fund managers reveals that Morgan Stanley (NYSE:MS) tops the most commonly used prime broker.
Preqin’s global survey of over 100 hedge fund managers in December 2013 showed that managers have frequently changed the service providers working on their funds, including fund administrators, prime brokers, custodians, auditors and law firms. Almost half of respondents indicating they had switched service provider at least once since their fund’s inception. Fund administrators and prime brokers are the most frequently switched provider, and most commonly, dissatisfaction with the quality of service provided was the reason given by fund managers for changing their service provider.
Other Key Facts
North American and European managers have been more active in switching service providers in 2013, with 35% of each changing service providers in the past year.
55% of Asia and Rest of World managers have switched a service provider in the past five years (excluding the last 12 months).
Fund administrators and prime brokers were the most commonly switched service providers in the past year and over the longer time frame.
Three-quarters of all Asia and Rest of World fund managers have switched fund administrators over the past five years, compared to 56% and 52% of Europe- and North America-based managers.
In contrast, 61% and 48% of Europe- and North America-based fund managers have changed prime broker compared to just 25% of Asia-Pacific-based managers.
Dissatisfaction with the quality of service led to 62%, 53% and 86% of North America-, Europe- and Asia and Rest of World-based fund managers to change service provider respectively.
SS&C GlobeOp was selected by the largest number of funds which launched in 2013 for administration services, following its consolidation and acquisitions in 2012.
Morgan Stanley (NYSE:MS) jointly tops the most commonly used prime broker by funds launched in 2013 with Goldman Sachs Group Inc (NYSE:GS), each representing 19% of funds launched in 2013.
“Our recent study of fund managers shows that many hedge funds change their service providers; 45% of the respondents indicated they had switched service provider at least once since their fund’s inception. Dissatisfaction with the quality of the service they receive is a common concern across all fund managers, and is a particular problem in emerging regions for hedge fund management, as the service provider sector may be less developed or has little local presence. There is certainly an opportunity for groups that can provide consistent, good service on a local level to appeal to this growing group of managers in Asia-Pacific and other regions outside North America and Europe.
For Europe-based managers it has been a challenging few years in terms of fundraising, and new regulations in the region have made it more costly to run hedge funds. As such, these managers are conscious of the need for service providers to provide good value for money. As their funds grow, North America-based fund managers tend to switch service providers to firms that are better able to cope with their scale. As a result, there is a clear opportunity for different types of service providers that can provide services to funds of different sizes, or are specialized in providing services for funds of a particular size.”
Amy Bensted, Head of Hedge Fund Products – Preqin