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Aite looks at the prime services business

Tuesday, February 16, 2010 — 12:44:55 (EST)

Boston, Feb. 16, 2010 -- A new report from Aite Group, LLC looks at the prime services business. Based on Aite Group interviews with more than 15 prime services providers, the report sheds light on how these firms view their business, and profiles seven leading prime service providers.

The business of prime brokerage is in a state of transition. The hedge fund industry is seeking to regain its ground, having lost US$400 billion in assets from its 2007 high. Leading prime brokers - Lehman, Bear Stearns, and Merrill Lynch - have either vanished or been absorbed, there's been a re-shuffling of the leader board, and the large investment banks have suffered balance sheet losses. The proliferation of mini-primes over the last few years has produced a variety of firms serving the small end of the prime brokerage market. At this juncture, prime services firms are experiencing the natural progression of the product life cycle; having passed through the introduction phase, they are shifting firmly into the growth phase, where their main goal is to increase sales and become the provider of choice for prospective clients. New players - established firms - are entering the market aggressively. While hedge funds have taken a hit, their longer-term prospects are good. Aite Group sees a steady average annual growth for single hedge funds, which ended 2009 with US$1.6 trillion in assets and will reach US$2.1 trillion by 2013. This will be welcome news to the prime services industry.

"For larger, committed prime services firms, a market of prospects well suited by a narrow set of services will continue to exist," says Denise Valentine, senior analyst with Aite Group and author of this report. "Success will thin the field of firms. This parallels the structure at the top end of the market, where a handful of large global prime brokers dominate the business for large hedge funds, and six major prime brokers currently have 76% of the market."

The report profiles seven prime service providers: Alaris Trading Partners, Cuttone & Co., Gar Wood Securities, Jefferies & Company, Merlin Securities, North Point Trading Partners, a member of ConvergEx Group, and Saratoga Capital. It also provides information on additional firms in the space.

This 38-page Impact Report contains eight figures and 20 tables. Clients of Aite Group's Institutional Securities & Investments service can download the report by clicking on the icon to the right. Related Aite Group Research:

Pricing and Valuation Services: The Search for Transparency Asset Management Business and Technology Priorities: Survey 2009 BPO Bounces Back: Investment Operations Outsourcing With U.S. Global Custodians

To purchase this report or for additional information, please contact: Aite Group Sales Tel: +1.617.338.6050 sales@aitegroup.com

About Aite Group, LLC Aite Group is a leading independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry. It was founded by leading industry experts in Banking and Securities & Investments. Aite Group brings together a team of business strategy, technology and regulatory experts to deliver comprehensive, timely and actionable advice to financial institutions and technology vendors. It seeks to become a true partner, advisor and catalyst by exchanging ideas with and challenging basic assumptions of its clients, ensuring that they always stay one step ahead of the competition.

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Source: Company press release.