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When Prime Brokers Fail: The Unheeded Risk to Hedge Funds, Banks, and the Financial Industry


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Добавил: Sergey Vasutin

Производитель: Bloomberg Press

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Praise for When Prime Brokers Fail
«An essential guide to understanding why so many hedge funds failed during the 2008 crash and why so many will continue to fail in the future.»
—Francois Lhabitant, PhD Chief Investment Officer, Kedge Capital Professor of Finance, EDHEC Business School

«A must–read for every hedge fund manager, investment banking executive, and prime brokerage professional. This is hands down the most educational resource on the challenges, trends, and risks within the prime brokerage space.»
—Richard Wilson, founder of the Prime Brokerage Association and

«Aikman does a masterful job of examining and explaining the intricacies and interdependencies of prime brokerages and the role that these operations play in our increasingly complex financial system.»
—Peter J. Shippen, CFA, CAIA President, Redwood Asset Management Inc.

When Lehman Brothers collapsed in the fall of 2008, hedge funds using Lehman as a prime broker found themselves unable to withdraw assets and many were forced to close. The dangers inherent in prime finance—the business relationship between prime brokers and their clients, namely hedge funds—increase the likelihood of widespread financial collapse. When Prime Brokers Fail is a detailed look at the relationship between hedge funds and their brokerages and the risks multiplied in extraordinary markets. This relationship has been the source of unexpected risk for banks lending to highly leveraged funds, as well as funds with assets at struggling banks.

Managing New Risk in a New World
«Whether you have been in the business for twenty years or are just interested in how the machine really works, Aikman's book is a must-have.»
—Stephen Burns, Director of Electronic Equity Trading, Wellington West Capital Markets

The collapse and sale of Bear Stearns in 2008 marked the beginning of a series of failures of financial institutions in what was to be the worst financial crisis since the Great Depression. Only a few months later came the bankruptcy of Lehman Brothers.

Prime brokerages attached to each of these investment banks were caught in a difficult position as clients—mostly hedge funds and institutional firms—attempted to withdraw and reclaim any assets stored at the failing firms. Many were unable to do so, and while assets were held in abeyance during bankruptcy proceedings, hedge funds struggled to manage increasingly risky and overleveraged bets with less liquid capital.

Before the crisis, both regulators and market participants disregarded the complex and dangerous nature of the relationship between prime brokers (the banks) and their clients (the funds). In When Prime Brokers Fail, J. S. Aikman examines the convoluted structure of this relationship, the main participants, and the impact of the near collapse of prime brokerages on the financial world. He also covers new ways to manage an inherently risky business, the structural adjustments firms will need to make to avoid similar disasters, and the inevitable regulation.

The New Dangers of Prime Finance
In this revealing book, J. S. Aikman takes a detailed and thorough look at the complex relationship between hedge funds and their brokerages and the risks that multiply in extraordinary markets. Before the credit crash, the inextricable relationship between banks and brokers was a little–known risk for both parties. When troubles loom large, the unraveling of these tightly wound affiliations can seriously damage both organizations and induce systemic financial collapse. When Prime Brokers Fail takes a close look at the unheeded risks of prime finance and lays out the steps required for managers to protect their funds and bankers to protect their brokerages.

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