Being a prime broker is difficult these days. It used to be free money. It was a great way of getting a captive client. Not my words, but the sentiments of an asset manager in the industry.
The imposition of Basel III's capital requirements on investment banks and other drivers such as restrictions on rehypothecation of collateral are transforming the prime broker model.
That is leading to a tightening in the cost of financing for hedge funds and for primes to turn away clients they might