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

by J.S. Aikman

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."-Franois 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 PrimeBrokerageGuide.com"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.The New Dangers of Prime FinanceIn 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.

Genres: Finance

307 pages, Kindle Edition

First published June 22, 2010

Reviews

[Mayank · Rating 3 out of 5]

The book describes the relationship between hedge funds and the prime brokers, the risks faced faced by both and the changes in the prime brokerage business after the credit crisis. It also gives some idea about the operations of stock lending business, repo transactions, the need for custodians, the risks created by leveraged hedge funds, the needs of collateral, rehypothecation and so on.

Informative book but it could have been 100 pages shorter. A few key ideas in the book get repeated endlessly. Like the need for regulation of the hedge funds and the prime brokers, the complexity and challenges of creating such regulations due to intransparency, multiple geographies, etc. The risks faced by funds if prime brokers default and vice-versa.

The text could have been re-structured to keep it succint.

[bookreader]

Despite the alarmist & deceptive title, I had high hopes for this prime-brokerage primer, given a dearth of written material on the subject. (What I know about the topic has come directly from one-on-one meetings with the primes themselves.) While its elaboration of the business model & securities-lending mechanics of prime brokers (ch. 7-8) was first rate, the rest of the book was a tedious, repetitive sludge.