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NAST Conference

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Limited sources of end user market data. Intermediary data is useful for peer comparison, not intrinsic measurement. Efficiency ... – PowerPoint PPT presentation

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Title: NAST Conference


1
NAST Conference
  • December 2006

2
Drivers of Change
  • Market Forces
  • Transparency
  • Limited sources of end user market data
  • Intermediary data is useful for peer comparison,
    not intrinsic measurement
  • Efficiency
  • Dual intermediation with no incentive for current
    market participants to evolve
  • Accountability
  • Difficult to perform as fiduciary under current
    model
  • Economic Forces
  • Prime brokerage bundled fee model is untenable
  • Custodial bundled fee model is untenable

2
3
Times of Change
  • Inverted credit and capitalization equation
  • In aggregate, brokers better capitalized than
    custody banks
  • Large hedge funds better capitalized than brokers
  • Conflicted relationships between intermediaries
  • Prime brokers going direct to lenders for
    exclusives
  • Custody banks constrained from lending direct to
    hedge funds
  • Prime brokers are largest customers of custody
    banks

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Industry Trends
  • Increasing Sophistication
  • Hedge Funds
  • Equity Repo for financing
  • Direct access to supply for borrowing
  • Institutions
  • Direct lending to hedge funds through credit
    intermediaries
  • Focus on intrinsic loan value vs. higher risk
    cash reinvestment
  • Recognizing true value of indemnification
  • As investors in hedge funds, much better risk
    comprehension
  • Emergence of Alternative Service Providers
  • Quadriserv
  • S3 Partners
  • Vodia Group

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