The prime brokerage firms are meant for the hedge funds and the term is used to denote a bunch of services that are enjoyed by the hedge funds. These services are provided by the investment banks. The service provided by prime brokerage firms is very useful because through these services, the hedge fund can enjoy security clearing facilities from a single organization. At the same time, the collateral necessities of the client are also managed by the investment banks.
Like all other brokerage firms, there is a professional fee that is charged for the services provided by prime brokerage firms. These fees, generally known as spreads, are charged as the clearing fees. At the same time, the charges are also imposed for financing the security positions on behalf of the hedge funds.
The services provided by prime brokerage firms are the following: The prime brokers provide the hedge funds with the clearance and settlement services related to the trade. These services have a worldwide base. On the other hand, the prime brokerages firms also arrange necessary funds for the clients. At the same time, the firms are also responsible for arranging currencies of different countries because the hedge funds while taking part in trading in different countries are in great need of the national currency of that country.
The service provided by prime brokerage firms also includes the operational support, which is quite necessary for the hedge funds. The hedge funds deal with a number of brokers and the prime brokers are responsible to remain in contact with all the other brokers on behalf of the client or the hedge fund. Again, maintaining the co-ordination between sales, trading, and research is also a responsibility of these brokerage firms. Securities lending is also a part of the service provided by prime brokerage firms. On the other hand, the fund managers are provided with portfolio reports that are quite useful in managing the growth of the money.
Apart from these, there are several other services offered by the prime brokerage firms. These brokerage firms are involved in the process of capital introduction. In this process, the prime brokerages bring the potential hedge fund investor and the hedge fund clients close to each other. These firms are also involved in providing the advisory services for managing the risks related to the process. Services provided by prime brokerage firms also include the leasing and servicing activities.
Last Updated on : 27th June 2013