HSBC Aims To Boost Prime Brokerage Business

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.


In Depth

Q&A: Rotation Capital's Rothfleisch On SPAC 2.0

Aug 11 2017 | 7:43pm ET

Corporate actions have long been a staple of event-driven investors, but activity...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Star Mountain: Private Lending in the Lower Middle-Market

Aug 14 2017 | 4:45pm ET

Private credit has become one of the most popular alternative asset classes in recent...

 

From the current issue of