Barclays reaps hedge fund riches in battle of the prime brokers
Barclays climbs to fifth in prime brokerage fee battle
Prime brokers serve hedge funds' increasingly complex needs
Business shows stable returns & growing slice of equities fees
By Sinead Cruise and Lawrence White
LONDON, July 25 (Reuters) -Barclays BARC.L is winning business from its top Wall Street rivals in prime brokerage, a lucrative investment banking battleground where lenders are battling to serve hedge funds in an array of increasingly complex trades.
The British bank has risen to fifth in the revenue table for prime broking for the year to the end of June, from around seventh five years ago, according to data seen by Reuters from research firm BCG Expand.
A second provider, who did not want to be named discussing sensitive client data, confirmed the fifth place ranking.
The achievement comes as CEO C.S. Venkatakrishnan prepares to unveil half-year results on Aug. 1.
Barclays' investment banking performance is in sharp focus, amid fears a decision to shift risk to other businesses could hobble the unit's ability to compete.
Mike Webb, global head of liquid financing at Barclays, told Reuters his team was now a genuine "disruptor" of the prime brokerage business.
Webb said the British lender's differentiation comes from investment in its digital platform, and an offering that combines fixed income and equities products where rivals tend to split them, a model that has taken eight years to perfect.
"We think we are the most integrated financing provider on the Street," he said.
"The large multi-strategy fund can come to us and have a singular conversation about government bond repo, credit, futures... At other banks, it's a fixed income conversation and an equities conversation," Webb told Reuters in an interview.
Prime brokerage, in which banks offer hedge funds services including financing, securities lending, custody and trade execution, is worth some $20 billion a year in revenues to banks, according to research firm Coalition Greenwich.
That has risen from $15 billion in 2020, the data showed, despite a relatively mature industry in which new entrants are relatively scarce.
But the wallet is expanding, Webb said, because clients are demanding more sophisticated services.
"A prime business brings stable, repeatable, consistent, high returning client centric revenue and returns to the table," Webb said.
Barclays has grown the business at a 6% compound annual growth rate since 2016, Webb said, and is targeting a high single digit rate from here on.
Mollie Devine, head of markets competitor analytics at Coalition Greenwich, said prime brokerage was the hottest battleground in global banks' equities businesses, particularly since a dealmaking slump has crushed advisory fees.
"A number of banks have solved different equations and ended up with prime as the place they wanted to invest within equities," she said.
Moving further up the ranking will be a tough ask for Barclays.
Goldman Sachs GS.N, JPMorgan JPM.N and Morgan Stanley MS.N dominate the industry, holding a market share of nearly 50% in prime with nearly $1 trillion in client balances apiece, according to Amrit Shahani, partner at research firm BCG Expand.
U.S. rivals including Citigroup C.N and Bank of America BAC.N, as well as Europeans such as BNP Paribas BNPP.PA, which in 2019 acquired Deutsche Bank's DBKGn.DE prime brokerage business, are also trying to grow their business.
Barclays' push into prime services is not without risk.
Taking on bigger clients with increasingly sophisticated trading ambitions is not a sure-fire route to profit, with Credit Suisse's troubles with failed private investment firm Archegos still fresh in the memory.
The competition has also intensified further since Credit Suisse's UBSG.S demise, said George Evans, president and co-founder of research firm Convergence Inc.
"There are close to 300 named prime brokers in SEC (Securities and Exchange Commission) filings and that's the same as around 12 years ago when we started," he said.
Prime broking is attractive to banks because unlike dealmaking or trading, it provides a steady and predictable stream of revenue, Evans said.
Barclays, a client of Convergence, has grown its business by being extremely focused on which funds to target, Evans added.
The bank added 69 fund relationships in the year to March 2024, according to previously unreported Convergence data, placing the bank ninth in prime broker rankings by total number of clients.
According to Barclays' Webb, the discrepancy in position between revenue and the number of clients exists because Barclays has targeted bigger, more global funds with more complex requirements.
"They are burning calories on the right names in the market," Convergence's Evans said.
Prime a growing slice of equities fee pie https://reut.rs/3zVy8b3
Prime broking revenue bonanza https://reut.rs/4bWbgFF
Reporting By Sinead Cruise and Lawrence White
Editing by Tommy Reggiori Wilkes and Susan Fenton
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
