11 October 2021
The relationship between a hedge fund and its prime broker is the most important one when it comes to the long term success of the fund. Prime brokerage services are crucial to the operation of a hedge fund, and the better the service a hedge fund receives, the better the outcomes are likely to be.
If you’re starting a hedge fund in Hong Kong, a key concern should be on-the-ground knowledge and experience in the territory. To a large extent, the success of a prime brokerage will depend on its ability to leverage relationships for mutual gain. Therefore, it’s important that they have proven and established commercial relationships within Hong Kong and the wider region.
If you’re launching a hedge fund in Hong Kong, choosing your prime broker is a critical moment in its development. How do you go about selecting the right one for your business in an increasingly competitive prime broker market with a proliferating number of prime brokerage providers to choose from?
Your prime broker will be your principal point of contact with the market. In effect, this means that the strength of the relationships your prime brokerage has across the market will determine the level of access you will have.
So when it comes to selecting a prime broker, you need to ask who they work with, what their relationships are, and their track record of delivery. Do they have the track record to back up their claims?
You also need to consider the trading platform your potential prime brokerage makes available. Is it easily accessible, straightforward to use and above all, secure? A responsive trading platform can make a crucial difference to the overall performance of any trade.
Is your prime broker well versed in a range of different strategies, particularly ones you wish to deploy, as well as any strategy that you may choose to add as your business grows?
As your prime brokerage will serve as the primary source of securities lending and financing, this should always be a key consideration. It becomes even more critical if you’re hoping to deal with hard-to-borrow securities or with strategies that require more substantial leverage.
To establish if your prime broker will accommodate your plans, you should ask for real-world examples of how they have met similar demands in the past.
The strength of a prime brokerage will be based on the skills and experience of the people it employs. Compared to custodian services, prime brokers will usually employ fewer numbers, but those they do employ will be highly experienced at what they do.
Ideally, your prime brokerage should have a range of people with different backgrounds across tier-1 financial institutions. They should have the ability to make sound strategic decisions as well as foster relationships. They should also have a proven track record of delivery.
Finally, it’s crucial that you understand the fee structure of your potential prime brokerage. Are the charges realistic for what you have planned?
GIS HK is one of Hong Kong’s leading providers of prime brokerage services. We have an unrivalled on-the-ground knowledge of Hong Kong and the wider Asia-Pacific region and have built strong relationships with our commercial partners.