Thursday, 24 July 2014
Last updated 28 min ago
Sep 4 2009 | 2:02am ET
When Lehman Brothers collapsed, many hedge funds moved their money from prime brokers to the supposedly safer waters of an HSBC Holdings account. Now, that bank is aiming to consolidate and expand its new roles as a broker to hedge funds.
“It’s a significant opportunity for a new revenue stream,” Stuart Gulliver, who heads investment banking at HSBC, said at a London conference. “We’ve seen a number of hedge funds moving their accounts to HSBC because their main concern is getting their money back.”
Gulliver is referring to the limbo some 700 Lehman Brothers prime brokerage clients find themselves in following the Wall Street bank’s collapse. Some $11 billion in hedge fund assets remain frozen as part of the bankruptcy proceedings for Lehman’s London arm.
“We can give people leverage in a segregated account, so they don’t have the operational risk that came out when Lehman Brothers failed,” Gulliver said.
Earlier this summer, HSBC set up a 50-strong prime services division. The bank’s prime brokerage will, as Gulliver said, use segregated accounts to avoid a Lehman-style freeze, but will also offer less leverage than hedge funds got used to in the salad days before the subprime mortgage crisis.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…