Hedge Funds Flee Morgan Stanley Prime Brokerage

Sep 18 2008 | 9:16am ET

Like rats fleeing a sinking ship, hedge funds are yanking their prime brokerage accounts from Morgan Stanley before it becomes the next Wall Street casualty.

Hedge funds accounting for less than 10% of Morgan Stanley’s prime brokerage balances have withdrawn their money or informed the firm they plan to do so, Bloomberg News reports. The departures came amid market rumors that Morgan Stanley, which along with Goldman Sachs is the largest prime broker, would be the next Bear Stearns or Lehman Brothers, but before news broke that it may be trying to become the next Merrill Lynch.

Morgan Stanley shares have fallen more than 40% in recent days, and the firm is reportedly in talks with several banks, notably Wachovia Corp., about a merger.

The firm’s clients have apparently gone over to Citigroup, Credit Suisse Group, Deutsche Bank and JPMorgan Chase. A Morgan Stanley spokesman told Bloomberg that the firm’s prime brokerage assets are a minimal amount of its liquidity.

When Lehman filed for bankruptcy earlier this week, billions of dollars in prime brokerage assets were frozen for the “short term,” according to administrator PricewaterhouseCoopers.


In Depth

Steinbrugge: Will Hedge Funds Help or Hurt During the Next Market Correction?

Sep 7 2016 | 11:55pm ET

Most investors have become accustomed to quick rebounds when markets correct, but...

Lifestyle

Quattrex Sports AG Debuts Soccer-Focused UCITS Fund

Sep 9 2016 | 9:54pm ET

Innovative alternative investment company Quattrex Sports has unveiled a new UCITS...

Guest Contributor

Malik: The Ever-Changing Middle Market and The Entering Class of 2016

Sep 2 2016 | 5:01pm ET

Deal sourcing and origination is only going to get more competitive given current...