Software and IT Services provider, SunGard, in association with financial research firm, Finadium, has identified five key trends in prime brokerage technology and services that are helping to create new approaches for companies.
The companies state that developments in these areas have helped to evolve and create methods for client services to help companies achieve growth, win new business, and retain clients in the changing landscape.
The research says that prime brokers remain one of the most important service providers for hedge funds, but that the nature of this relationship is evolving. Hedge funds remain loyal to their prime brokers but also see their banks as more potentially vulnerable counterparties than in the past.
According to Josh Galper, managing principal at Finadium, “A key challenge for prime brokers today is to understand how best to interact with their hedge fund clients, particularly around technology and services. The right technology can become a revenue driver while the wrong technology may result in client frustration and losses. Prime brokers must closely evaluate their financial, operational and technological resources to determine the best mix for deepening relationships and franchises with their target hedge fund clients.”
Another trend proposed is that prime brokers must be equipped to make smart choices about where to allocate technology and service resources to balance capturing client loyalty with supporting hedge fund independence. The research also states that there has been a shift of funds turning toward more listed and centrally cleared products, and that, “prime brokers must provide strong operational support and access to tools and services without enforcing exclusive relationships.”
Attention to operations remains a critical service aspect for prime brokers and their offerings to hedge fund clients, say the firms, adding that consulting services including legal and technology advisement are also becoming important differentiators.
Jane Milner, head of strategy for Apex Prime at SunGard, says, “In the prime brokerage space, the provision of excellent client service is fundamental; technology solutions that help consolidate and streamline the information and processes that deliver prime services can help our customers to achieve agile growth through improved client service.”
The identified trends conclude with the notion that the prevalence of increased transparency and reporting appear to be the, “next frontiers for prime brokers in communicating with their hedge fund clients.” The paper notes that, in particular, equity-focused hedge funds are seeking more access to real-time stock loan data.