Education Center Topics:
- What Does a Prime Brokerage Provide?
- Prime Brokerage Financing - The Financial Services They Provide
- Global Securities Lending - How Does It Work?
- Global Execution Services - What It Is and How It Works
- Technology & Client Reporting - The Tools of the Trade
- Capital Introduction - The Basics of How It Works
- Services a Good Broker Should Provide
- The Importance of Having a Solid Balance Sheet
- Derivatives Expertise - What a Good Broker Needs to Know
- What can PRIMEBROKERAGE.NET do for you?
Prime Brokerage Services - What Does a Prime Brokerage Provide?
In business terms, a prime brokerage is simply the common name that is given to the service packages that are provided as a bundle to hedge funds by investment banks.
They can also be offered by securities firms as well. Their purpose is to provide hedge funds or just any expert investor that may need to be able to borrow cash for investment purposes. By doing this, a hedge fund can receive numerous advantages by using prime brokerage services, which includes things like having a central facility devoted to securities clearing. The requirements in terms of collateral are also spread across all of the business contracts that the brokerage deals with.
The prime brokerage services that are provided include a number of things. A broker can offer a client, in addition to simply lending out securities and money, but also global custody, technology tools to help the client track how their portfolio is performing and operational support. With operational support, the brokerage will usually act as a middleman between other brokers and their client. The concept of global custody is what allows the broker to do this, meaning they keep their client's money in their possession and provide a central facility for the client to close other transactions. The prime brokerage also offers their clients a means of checking their assets and providing any changes, if needed.
One of the prime brokerage services offered to clients is technology tools. These tools will allow the client to be able to check up on their portfolio and see how their investments are doing. These tools can be provided in a variety of different ways. The prime broker can offer something as basic as statements on a daily basis, telling the client how their investments did overall for the day. Or they may offer something a little more complex like reporting that is done in real time, allowing the client to check on their investment at any given time, whenever they wish to see it.
With the popularity of hedge funds skyrocketing in recent years, prime brokers now face a lot of competition from each other. This fact is reflected in the prime brokerage services that are offered, as well as the quality of the services provided. Clients with hedge funds will receive numerous benefits by dealing with a prime brokerage. The broker can make good money too, as they make money by way of the financing they offer to clients and with fees charged on a per item basis when transactions are cleared.