Has the credit crisis put an end to the heydays of prime brokerage?

A new report from Celent indicates it might have. Unlike the halcyon days when prime brokers would jump through hoops—and offer huge levels of leverage—to nab a hedge fund client and keep it happy, some are now “struggling to cope with the next stages of the credit crisis.”

In an industry where participants are “usually falling over each other to serve their profitable hedge fund clients, [prime brokers] are now playing hardball, sometimes without regard to the creditworthiness or track record of individual firms.”

The new stinginess “has already resulted in the collapse of some funds forced to liquidate assets,” Celent says, and may push hedge funds to seek capital from new sources.

In particular, the report says that hedge funds may go public or issue bonds to raise money.

“The lending squeeze is also likely to fuel the existing trend of larger hedge funds looking to reduce their financing ties with prime brokers by raising permanent capital,” Celent says.