RBC Forms Global Prime Services Group |
Date: Tuesday, April 15, 2008
Author: Bill McIntosh, Senior Financial Correspondent, Hedgeworld.com
TORONTO (HedgeWorld.com)—RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada, that country's biggest bank, has revamped its prime brokerage division to provide asset managers with a more coordinated and broader range of investment services. The formation of RBC Global Prime Services Group is designed to provide comprehensive support to hedge fund managers, mutual fund managers and institutional asset managers via a single platform. The move comes as the prime brokerage businesses of a handful of investment banks face new challenges to their traditional dominant market share from commercial banks with bigger balance sheets. "This has been put together to correspond with the direction our clients are taking," Colin Bugler, managing director and head of global prime brokerage, said in a phone interview from Toronto. "Our traditional money manager clients have been running more of a hedge fund strategy using 130/30 strategies and leverage, while hedge funds are going public and moving into long-only funds. People talk about bringing down barriers but we have put that in motion." Breaking down the silos for different types of asset managers will see the RBC prime brokerage bring together trading technology, including algorithmic trading, securities lending, capital introduction, direct market access and financing services. The business unit has around 125 staff in Toronto, New York and London with a futures operation in Chicago. "We have the ability to provide a bit more of a bespoke service for a lot of the mid-sized managers who can get tired of being told how to run their business," Mr. Bugler said. "When they come to us they find a refreshing perspective in that we are willing to look at each situation individually and offer customization where needed." The shape of prime brokerage businesses is undergoing rapid change. One factor is the erosion of structural differences among different types of asset managers. Another is increasing institutionalization and the demands it is generating. The criteria for selecting a prime broker also are evolving. "Hedge fund managers used to consider capital introduction services and platform technology important, while at the very bottom was the financial stability of the prime broker," Mr. Bugler said. "In the last few months people have begun demanding that funds use prime brokers linked with a stable financial institution. We have certainly seen a flight to quality. "We see clients that are concerned their prime broker be able to finance them in difficult times," he said, noting that RBC has a AA rating. During the 10 years since RBC set up a prime brokerage operation the bank has avoided focusing on just one asset class. It has targeted a multi-product solution to hedge funds spanning long/short equity, fixed income, FX, futures and base metals. RBC said it has invested in technology this year, while recording a 20% increase in clients and a related increase in assets under management during the past six months. The new structure combines a variety of prime brokerage services as well as several separately branded service businesses. This includes: RBCAccel, a multi-asset class proprietary trading platform; RBC Capital Introduction Group; as well as the RBC Emerging Manager Allocator platform, a proprietary, multi-strategy growth fund of hedge funds. Also being integrated into the new unit is the RBC Global Futures & Base Metals Group, which offers global execution and clearing solutions for futures and options traders as well as FX, equity, base metals, and commodity and energy product and service offerings. "This is just formalizing the cooperation of different parts of the group to make the best use of resources and personnel," Mr. Bugler said. "We have brought together a bunch of growing businesses and we are adding people to make sure we don't have gaps between the products."
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