Study of prime service in Indian Context

Abstract

Prime brokerage is the generic name for a bundled package of services offered by investmentbanks and securities firms to hedge funds and other professional investors needing the ability toborrow securities and cash to be able to invest on a netted basis and achieve an absolutereturn. The key advantage of a prime brokerage is that it usually provides a client with ability totrade with multiple brokerage houses while maintaining a centralized master account with all ofthe client's cash and securitiesi. The leading investment banks see a tremendous growth in theAsian markets, and a bank like UBS doubled the amount of assets serviced by its Asian primebrokerage business last year, and expects that figure to grow at 50 percent annually goingforward. There is also a move to new products outside the realm of equities. With Indian andChina, as emerging markets it becomes imperative to study the growth of prime brokerageservice in India and what changes the current model should undergo to make it favourable inIndian market.We proceeded with the project in the following manner; first we developed an understanding ofthe Prime Brokerage Services and also gained an insight about the strategic and financialaspects of Prime Services. We also did a detailed study on hedge funds which forms theclientele of prime brokers. Since the market viability of prime brokers in India depends on thegrowth of hedge fund industry, hence an extensive study has been done on hedge funds. Thevarious strategies followed in emerging market have been discussed. India as a market isextremely regulated and because of its structural issue, it has not seen a tremendous growth inthe hedge fund market. The regulatory concerns have been discussed including the reasonswhy the market has not been able to rise in India.The report concludes with a brief on future of hedge funds in India. Hedge funds can maximizethe extraordinary growth which India's rapidly growing promises to offer.