HSBC preps international prime finance service

HSBC's plans to establish a global prime services platform will culminate with the launch of a full international prime finance service for US hedge funds in 2014

HSBC builds on EM reach to target US-based hedge funds

HSBC wants to carve out a niche for itself in the increasingly crowded US prime brokerage market by playing to its strengths in emerging markets, according to Paul Busby, its head of prime finance sales in America.

The bank aims to capture business from US hedge funds that are moving into the rapidly growing emerging markets of Asia, Latin America and the Middle East. This is where the bank has its strongest clearing and execution capabilities.

"We're not looking to compete with the big US primes for domestic equity long/short clients," says Busby. "The plan is to offer a bespoke prime finance service focused on international markets where HSBC has an edge."

The bank is eager to capitalise on the unbundling of prime brokerage as some hedge funds look to parcel out business to banks that specialise in particular markets or services.

Target clients include global macro and multi-strategy hedge funds as well as fundamental long/short managers that trade emerging markets, he says.

HSBC launched its custody-based prime brokerage service in Europe in 2009 and rolled out the offering to Asian clients in 2011.

Busby was hired in July 2012 to expand the bank's prime finance operations in the US. He joined from Deutsche Bank where he was most recently co-head of equity finance.

The bank has since made a number of senior hires with Busby now overseeing a 20-person US prime finance team. The most recent addition to the team is former Morgan Stanley executive Kevin Nowlin who has joined to develop the equity swap and delta one sales initiative.

HSBC is currently providing US clients with a synthetic prime brokerage service, which allows hedge funds to take leveraged exposure to markets through derivatives that replicate their performance.

Equity swaps are often the most operationally efficient way for hedge funds to access emerging markets where arcane regulations and capital controls can make it difficult for foreign investors trade on domestic exchanges.

The bank expects to offer a full international prime finance service for US hedge funds sometime in 2014.