V: It sure doesn't surprise me that many of The Houses are supporting the large Hedge Funds...The Scam Continues <VBG>...
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Big Banks Corner Hedge Fund Services
Saturday April 21, 12:13 pm Eastern Time
<<NEW YORK (Reuters) - Some of Wall Street's biggest investment banks have also cornered the market in providing new financing and administrative services to hedge funds, the fast growing but risky investment vehicles.
Morgan Stanley (NYSE:MWD - news), Bear Stearns (NYSE:BSC - news) and Goldman Sachs (NYSE:GS - news) rank as the three most successful prime brokers, according to new data published by HedgeWorld Limited, a hedge fund information group.
Between them, the three groups service nearly 70 percent of the $100 billion in assets that are being managed by the 998 hedge fund managers that New York-based HedgeWorld surveyed.
Hedge funds are loosely regulated investment pools that largely cater to institutions and rich individuals and promise returns that are not correlated with major benchmark indices.
Demand has been rising for these potentially rewarding but also risky investment vehicles that distinguish themselves from mutual funds by using leverage and selling stocks short.
Last year alone assets under management jumped 26 percent to $408 billion and on average their performance rose 7.61 percent, while diversified stock mutual funds fell 1.67 percent, posting their worst performance since 1990.
The S&P 500 declined 9.10 percent on a total return basis in 2000.
For prime brokers, the most profitable part of their business is offering hedge fund managers access to extra leverage, or borrowed money, to boost returns.
This new survey is designed to provide an overview of brokers' strengths and specialties to help guide new fund managers in finding the right fit and help financial institutions reposition themselves in this industry.
``Although the business is concentrated among the three biggest brokerage houses, there are still opportunities for niche players which this survey may help identify,'' said Ferenc Sanderson, director of research at HedgeWorld.
Morgan Stanley beat out its competitors as the most popular broker with both the biggest hedge funds -- those that manage more than $1 billion in assets -- and the smallest -- those with less than $10 million under management -- the survey found.
At the moment Pequot Capital Management Inc. is the biggest of the world's estimated 4,800 hedge funds with $15 billion under management.
Morgan Stanley also topped the list as most popular broker for hedge fund managers pursuing a long-short strategy where they borrow stocks in hopes of buying them back later at a lower price and a global macro strategy which takes big directional bets on interest and exchange rate movements.
Bear Stearns scored best with managers who specialized in fixed income and convertible arbitrage, where managers usually hold a convertible bond and sell short the common stock of the same company.
In the future HedgeWorld plans to release similar surveys about other services that hedge funds need from lawyers, independent administrators, auditors and custodians.>> |
