Prime Brokerage 101 https://www.forbes.com/sites/timothyspangler/2013/04/02/prime-brokera...
Understanding what hedge funds actually do requires a more-than-casual
familiarity with the large investment banking teams that are these funds entry
point into the global markets - that is, prime brokers. Trading securities on the
scale and with the frequency of the most successful hedge funds takes more than a
few Bloomberg screens and an online brokerage account. Prime brokers are central
to the operation and ultimate success of most hedge funds, especially those that
want to sell short or to magnify their bets with borrowed money.
In many ways, there would not be hedge funds if it weren’t for the large, bulge-
bracket investment banks like Goldman Sachs and Morgan Stanley and Bank of
America Merrill Lynch and Credit Suisse that provide them with these prime
brokerage services.
What does a prime broker actually do? In addition to execution and custody
services, a prime broker provides hedge funds with the ability to borrow stocks and
bonds (known as “securities lending”) and to borrow money to buy stocks and
bonds (known as “margin financing capabilities”). The prime broker stands as an
intermediary between hedge funds and two important sets of counterparties - on
the one hand, pension funds and other institutional investors with shares to lend
(for the ultimate purpose of short selling); and on the other, commercial banks with
money available for margin loans.
Short selling is so closely associated with hedge funds that perhaps a few words of
explanation are warranted. When selling a security “short”, the underlying bet
being made is relatively straight-forward. By engaging in short-selling, an investor
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Prime Brokerage 101 https://www.forbes.com/sites/timothyspangler/2013/04/02/prime-brokera...
As we transition from fall to winter, celebrating the holidays with family and
friends and planning winter getaways occupy a lot of our time and attention.
Equally important, if not more so, you should also prepare your finances to take
advantage of specific tax-saving opportunities before the end of the year. This is
especially true for 2018, the first year of the Tax Cuts and Jobs Act. Considering
changes in income tax rates and traditional deductions, it is critical to invest time in
year-end planning rather than wait until next year to file your taxes and hope for
the best. I have outlined six steps that individuals and business owners can
consider as part of the planning process.
#1 Review your portfolio.
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