Some hedge funds are financing trades for other hedge funds

After the Archegos collapse, hedge funds are competing to borrow money from a dwindling number of banks

Seldom have so few lent money to so many. The number of large banks offering prime brokerage to hedge funds has shrunk, partly owing to the bumper losses suffered by a string of banks after the collapse of family office Archegos in March.

Meanwhile, the crowd of hedge funds clamouring for prime services has grown. The total number of firms is up by a third in the past seven years, and hedge fund portfolio holdings reached $4 trillion this year.

These shifts have created a squeeze on prime