Asia's prime brokerage market, dominated for so long by just two banks, is becoming more competitive, a new survey shows.
Indeed, one of those two banks, Morgan Stanley, is now in danger of dropping out of the duumvirate with Goldman Sachs. Credit Suisse, the region's third largest prime broker, is now just $420 million in assets behind Morgan Stanley, the annual AsiaHedge survey shows. Just a year ago, the gap was $4.8 billion.
Four years ago, Goldman Sachs and Morgan Stanley accounted for some 60% of Asian hedge fund assets. Now, they're settling for 30% between them, while three other prime brokers, Credit Suisse, Deutsche Bank and UBS, have built their market shares to more than 10% each. Those five now command 65% of the regional prime brokerage market.
Bank of America also made gains, boosting its prime brokerage assets in the region by more than one-third to take the number six spot in the rankings from Citigroup. BofA and Credit Suisse were the only prime brokers to add clients in a region that saw more than 80 hedge funds close last year and total prime brokerage assets fall from US$150 billion to US$137 billion.
There are other signs of a shakeup: Deutsche Bank is now the largest prime broker in Hong Kong, thanks in no small part to its servicing of Azentus Capital, the biggest Asian hedge fund launch of 2011, and despite it loss of 10% of its assets. Deutsche Bank, the fourth-biggest prime broker in the region, also displaced UBS, the fifth, as the largest prime broker in Australia.