Q&A: Pershing Teams Up With BoNY-Mellon

Jun 20 2008 | 2:00am ET

Bear Stearns’ recent meltdown has made for a few sleepless nights for some hedge fund managers who wonder if their assets and collateral are safe with their own prime brokers.

FINalternatives Prime Brokerage 2008FINalternatives Prime Brokerage 2008But one prime broker’s misfortune is another’s opportunity, and Pershing Prime Services is ready to cash in on the turmoil in the marketplace. The firm has teamed up with the Bank of New York Mellon Corp. to provide managers with prime, custodial, accounting and administration services, all under one roof.

FINalternatives: What is your relationship with BONY-Mellon and what does it mean for your hedge fund clients?

Jeremy Todd, director: Pershing offers a variety of services and solutions to hedge funds including securities lending, business consulting, cash management, operational support, trading services, and flexible technology and reporting capabilities. Through our tri-party account approach with our parent company, The Bank of New York Mellon Corp., we are also able to offer hedge funds custody, administration, and accounting services, as well as an integrated 130/30 solution. Our integrated tri-party platform is advantageous for hedge funds looking to diversify their counterparty risks where they hold their longs at The Bank of New York Mellon and their shorts at Pershing, which is unique to us in the marketplace.

FINalternatives: How big are the hedge funds serviced by Pershing, and what are their strategies?

Todd: We are targeting hedge funds across the full spectrum of size and strategies. We serve customers who are multi-billion dollar firms and also serve customers who are under $100 million, including start-ups. Our customers’ total assets are close to $150 billion under management, and we have approximately 35 customers. About one-third of our customers are 130/30 managers.

FINalternatives: What attracts Pershing to the 130/30 space?

Jack Huber, director: When you get into the 130/30 space, we have a very unique offering as we can offer the services of a custodian bank on the long side and prime broker services on the short side. Although this may be a strategy that some people say is still unproven, 130/30 is a growing strategy among traditional long-only hedge fund managers. If you are going to allow mutual funds to use shorting somewhere in their strategy, then I think 130/30s are here to stay.

FINalternatives: The demise of Bear Stearns has brought the issue of counterparty risk to the forefront. What are you doing to quell clients’ concerns?

Todd: Counterparty risk is an important issue for hedge funds and we believe Pershing and The Bank of New York Mellon’s stable balance sheet provides hedge funds with a strong level of comfort. A lot of hedge funds are moving their fully-paid for assets into banking institutions, such as The Bank of New York Mellon, which is the only custodial bank that has an affiliated company with a prime brokerage business. There are also some operational nuances that can be challenging to support when it comes to tri-party relationships and moving collateral out of one account into another. We are able to handle these collateral movements in a more operationally efficient manner.

Craig Messinger, managing director: Certain primes are going to enjoy a pretty good lift because of what is going on in the market. We are seeing more inquiries and accounts approaching us. We’ve enjoyed good growth and have a strong pipeline of customers in terms of size and strategies. You will see a doubling or tripling of our prime services business within the next 12 months.

By Hung Tran

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

In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...


Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...


Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…


Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.