Hedge funds face higher prime broker charges under Basel III
Hedge funds will soon be charged more to borrow from their prime brokers, banks warn – a result of new capital and liquidity rules, and a development that could cap the amount of leverage funds are able to deploy. This could spell disaster for some strategies
For months now, prime brokers have been warning that tougher rules on bank capital and liquidity will force them to charge more for financing and cut the amount of leverage they provide to clients. Few hedge funds are listening though, and it is not hard to see why. Despite the dire predictions, the cost of financing has barely budged for most of them.
“Lately, we’ve heard a lot of ‘sky is falling’ talk from prime brokers, but when you really get down to it and ask them if they want you to move
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