Banks Have A Capital HF Idea

Date: Wednesday, November 28, 2007
Author: Hedge Fund Daily

Investment banks are beefing up their capital introduction teams with the hopes of being there when the next hedge fund star starts shining. Truth be told, reports Financial News, the strength of a capital introduction team is not a big deal for the largest hedge funds checking out prime brokers—it ranked 10^th in a Greenwich Associates survey among HFs with assets of $1 billion or more—but it headed the list of concerns for hedge funds with $100 million in assets or less. In general, says FN, capital introduction teams have gained in stature over the past few years as the growth in the HF industry has made finding new sources of funding for the hedgies—especially start-ups—a raison d’etre. The primes' goal: to turn those fledgling funds into fee-generating clients. This is particularly true, according to FN, for prime brokers outside the three biggest (Morgan Stanley, Goldman Sachs and Bear Stearns which together hold nearly 60% of the hedge fund markets) such as Credit Suisse, Lehman Brothers, UBS and Merrill Lynch. Even the Big 3, however, are adding to their capital-introduction ranks as they prepare to tap more heavily into emerging markets of the Middle East and Asia. Morgan Stanley, for example, boosted its capital introduction team by 20% in the past year. And Goldman Sachs wants to grab more of the market via the newbies. A GS source told FN, “The start-ups of yesterday are the billion-dollar funds of today. Almost all those funds are open for the tight-type of investor.” Some banks are also embellishing their teams to offer advisory services to help start-ups with their legal and set-up needs, but there are others that prefer not to go that route.