Goldman Sachs and Morgan Stanley continue to take the lead in Asian prime brokerage mandates, although data provider Eurekahedge suggests their combined pre-crisis dominance is gradually being eroded, with large hedge funds now awarding two or three mandates for one strategy.
In fact Goldman has actually seen its market share of the region’s $135.3 billion in hedge fund assets increase to 28.41% as of August this year, from 26.49% in 2007.
It is Morgan Stanley which has been more forcefully hit, seeing its share shrink from 26.62% in 2007 to 24.38% over the same period, according to newly released figures from Eurekahedge.
Meanwhile, UBS and Deutsche Bank have retained their pre-crisis third and fourth places, while increasing their hedge fund AUM.
UBS has grown its share from 9.15% to 13.24%, helped by the fact it was one of three prime brokers (along with Goldman and Morgan Stanley) mandated for the $2 billion Azentus fund launched in April this year. Meanwhile, Deutsche has steadily grown its share from 7.5% to 8.87%.
The fifth and sixth placeholders from 2007, Credit Suisse (6.6%) and Citi (3.23%), have reversed their standings, with Citi now holding an 8.3% market share - a full five percentage point rise over the past four years - while Credit Suisse has 4.56%.
Pre-crisis, Goldman and Morgan Stanley accounted for more than 53% of hedge fund assets, and that figure has only shrunk fractionally to 52.79% - entirely accountable to Morgan Stanley.
But Eurekahedge considers the US banking pair together when it says in its latest report: “In the last two years, the space has seen more equitable distribution among large institutions and the combined share of the top two prime brokers has fallen."
Singapore-based Farhan Mumtaz, senior Eurekahedge analyst, argues that stiff competition among prime brokers for the largest hedge funds has made it difficult for new players to break into the market. “However they have managed to get a foothold by targeting niche sectors and smaller hedge funds.”
An example is Newedge, which broke into the top 10 rankings for the first time in 2011 with a 2.35% market share. It specialises in commodities trading adviser and macro strategies, of which there have been several launches in the region this year.
Larger prime brokerages will continue to build market share – while smaller ones will see a decreasing portion – as hedge funds will “prefer to work with the larger, more renowned and financially stable prime brokers”, says Mumtaz.