18/08/2010 Author: Tony Griffiths

Merlin Securities picks up first $1bn PB client

US prime broker Merlin Securities has picked up its first $1bn client, as hedge fund cashflow problems and managers' continued need for multiple prime broker relationships helps drive business to the prime brokerage industry’s one-stop-shops.

The $1bn fund’s assets – which are to be divided between Merlin’s three custodians, JP Morgan, Goldman Sachs and Bank of America – will arrive in three tranches across August and September. The record mandate follows an influx of larger mandates for Merlin in the second quarter, including an $800m client.

“We are finding more managers who are looking for portfolio margin, risk reporting and advanced analytics, as well as multi-custodian aggregation, and that’s been a very positive thing,” said Ron Suber, Merlin’s head of sales and global marketing. “We’ve had a very good run, given the new investor requirements and the dynamics in the prime brokerages services market.”

Last week, reports in the Financial Times suggested that US banks were bracing themselves for a tough third quarter of the year. Client data from Credit Suisse Prime Services showed reduced leverage levels post-May after a rise at the beginning of the year.   

“As performance is down – May and June weren’t so good in general – as well as new money and leverage, managers are finding solutions that are bundled,” said Suber. “We have seen significant moves from a few of the big prime brokers in particular whose clients don’t like the single prime, they don't get the analytics they require for their institutional investors, they don’t like the service level, they don’t like the counterparty risk they feel exists and they want to be multi-prime.”