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Canadian hedge funds say it`s hard to take recent RBC criticism at face value given the banks` parti


Date: Saturday, January 24, 2004

From Canada.com: Hedge funds might be big and scary to Gordon Nixon, chief executive of Royal Bank of Canada, but it's hard to take his comments at face value given the banks' participation in this blossoming industry: "You don't open your mouth and put your foot in it when a big part of your firm's livelihood and your shareholder value is in the hedge fund business," said one of many hedge fund executives offended and perplexed by the bankers' comments. "It's a bit disingenuous," said another industry player. For one thing, the big banks are all dying to win trading business from U.S. and Canadian hedge funds because they represent a new and tantalizingly large source of revenue. RBC, for instance, runs the country's largest so-called prime brokerage, dedicated to serving hedge funds. Bank of Nova Scotia, TD and Bank of Montreal are also targeting this business, after the explosive growth of the prime brokerage industry in the U.S. Along with handling trades and administration, the banks routinely match up potential investors and hedge funds. These "capital introductions" are commonplace. Not only are the banks eager to serve hedge funds, their own proprietary trading operations use many of the same tactics and strategies, from short-selling to arbitrage to derivatives trading. Banks are essentially the biggest hedge funds in the country.