According to the survey conducted by The HedgeWorld Research Institute, the research and analysis arm of HedgeWorld Limited, the three firms served as primary brokers to more than 70% of the nearly $100 billion in assets. The poll covered 998 single manager hedge funds.
The survey examined prime brokers in terms of the number of funds served and by the style and size of the managers. The data used was as of year-end 2000.
“The survey clearly shows a concentration of business among the three large brokerage house providers of primary broker services,’ said Ferenc Sanderson, Director of Research for HedgeWorld Information Services. “Nonetheless, there is stiff competition for the business of hedge fund managers.”
The study found:
- Morgan Stanley Prime Brokerage serves 210 of the 998 funds polled and accounts for $32.6-billion in assets.
- Second-ranked Bear Stearns Securities Corp. services 187 funds with $22.3 billion in assets.
- Goldman Sachs & Co. ranked third with 143 funds and $15.6 billion in assets.
- Merrill Lynch Prime Brokerage was a more distant fourth with $6.5 billion in assets.
- Banc of America Prime Brokerage was next on the list, with $4.23 billion.
The survey also reveals that Morgan Stanley reigns as the most popular prime broker for the largest funds in the survey — those with more than $1 billion in assets — and serves 8 of the 15 such funds.
On the other side of the scale (funds with $10 million and less in assets) the top three brokers, in order, are Morgan Stanley, Goldman Sachs, and Bear Stearns.
Bear Stearns is the primary broker most commonly cited for managers specializing in fixed income, convertible arbitrage, market neutral, and event-driven strategies, according to the survey.
Meanwhile, Morgan Stanley is the most used prime broker by managers specializing in global macro and long short strategies. ED&F Man is the most popular prime broker for managed futures players, while short sellers cited ABN Amro most often.
Selected components of the HedgeWorld data is included in Global Custodian’s 2001 Prime Broker Survey (Page 17).
The HedgeWorld study was highlighted in the Alternative Edge newsletter, which is published weekly and available free to registered members of HedgeWorld at http://www.HedgeWorld.com .