Survey: One-Third Of Hedge Funds Dissatisfied With Prime Brokers

Jun 16 2008 | 12:04pm ET

More than one-third of hedge fund and CTA managers are considering changing their prime brokers or have recently done so, according to a new survey conducted by FINalternatives and Advent Software. Funds report that the main reason they are considering changing prime brokers is because they are dissatisfied with the level of personal service they are receiving, with poor competency also playing a major role.

FINalternatives Prime Brokerage 2008FINalternatives Prime Brokerage 2008In the survey, which was sponsored by Advent Software and is available in the 2008 FINalternatives Prime Brokerage special, over 120 hedge fund and CTA managers were asked to rate their prime brokers on personal service, cost/value, competency, capital introduction capabilities and electronic execution.

One key finding is that, while 63% of fund managers say their prime brokers are either "good" or "excellent" when it comes to personal service, satisfaction in that area has declined markedly. Last year, 80% of funds gave their prime brokers high marks for personal service. The drop in satisfaction may be due to last year's turbulence in the industry, as 16% of fund managers report that the liquidity crisis has worsened their relationships with their primes.

When it comes to cost, a surprisingly small number (only 7%) of respondents give their prime brokers "poor" marks, with 39% rating cost as "fair."

When it comes to capital introduction, survey respondents report that their prime brokers' services fall far short, with 38% of respondents rating their primes as "poor" performers in the capital introduction space.

As for electronic execution, technology-savvy funds are the most satisfied customers. Of those funds that rate themselves as "advanced" in terms of electronic execution needs, 81% rate their prime broker's electronic execution services as either being "good" or "excellent."

This article appeared in the June 2008 edition of
FINalternatives Prime Brokerage.

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