Fact Sheet: What Prime Broker Is And Ways Prime Brokerage Services Can Work To Your Benefit

By Author: Andrew Bui
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Prime broker refers to a firm, such as securities firm and investment bank, which offers bundled package to clienteles such as stock specialists, professional traders, hedge fund managers, money managers and other professional investors. These clients have one common denominator and that is their need for an ability to borrow funds and securities for investment purposes. Prime broker supplies hedge fund a centralized clearing platform for securities and nets collateral obligations of the hedge fund across all deals it handles.

Prime broker makes technological tools accessible to their clients, so their clients can monitor their portfolio positions and efficiently manage their money. Prime broker are equipped with the technology that can allow clients to gain access to statements daily and get precise portfolio reports in real-time.

Prime broker differs in the kind of bundle services package that they offer, and while a few prime brokers may offer services related to finance, global custody and securities lending, others may offer other types. Some broker may throw in services in the form of support in the ...
... operation aspect and customization of technology to suit their clients' needs. In the global custody classification of services, a prime broker can offer services such as asset servicing, clearing and custodial services. It also lends securities and stocks in exchange for collaterals, such as cash, securities or Letter of Credit that is of similar or more value than the loaned securities.

As part of the prime brokerage services, a prime broker may provide financial and operational support services, such as managing client assets and taking in the responsibility of being the point of contact between a broker dealer and hedge fund. Some clients may need particular specialized prime brokerage services, and certain prime brokers can address those needs. Ideal examples of this kind of services are providing hedge fund with office space by leasing it to them and offering on-site services. In order to stay competitive in their industry, some prime brokers offer extra prime brokerage services such as capital introduction, a term that pertains to a prime broker introducing a hedge fund client and a hedge fund investor to each other. Other "value-added" prime brokerage services that a prime broker can offer are advisory services and risk analytic technology combined with consultation with risk specialists.

At present, prime brokerage is a competitive field and is a significant contributor in the success of the investment banking industry. Various benefits can be received by clients if they avail of prime brokerage services, and some of these benefits are in the areas of making asset management easy while realizing profits at the same time. Like any other financial decisions, there are downsides involved in prime brokerage services. However, these risks are manageable, and preparing for critical market events is part of the business.
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