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pb273
Topic Author
Posts: 670
Joined: July 14th, 2002, 3:00 am

### Which Prime Broker for a Startup HF?

I am interesting in opening my own HF. Having seen the seeding business from close angles, I know that it is impossible for me to raise seed capital and the only way to go forward is to use my own capital (and I don't have any rich friends or relatives either). Since, I am planning to use my own capital, I can't of course afford Goldman Sachs as a Prime Broker or McGradley & Pullen as an Auditor, etc. I am also still early stage of planning and can be a year or more away from making a step forward.Is there anyone on this forum who had the experience of starting their own hedge fund? If so, can they share experiences about using a cheaper Prime Broker, cheaper Auditor, cheaper Administrator, etc ... who are the cheap guys out there and whom do you recommend and why? any real experiences will be great ...

gardener3
Posts: 1496
Joined: April 5th, 2004, 3:25 pm

### Which Prime Broker for a Startup HF?

It depends on how much capital you have and what instruments you plan to trade. Take a look here: http://www.nptradingpartners.com/

PaperCut
Posts: 1616
Joined: May 14th, 2004, 6:45 pm

### Which Prime Broker for a Startup HF?

The way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.

pb273
Topic Author
Posts: 670
Joined: July 14th, 2002, 3:00 am

### Which Prime Broker for a Startup HF?

QuoteOriginally posted by: PaperCutThe way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.Strange. That's a bit different from my experience. I had dealt with both Citi and GS as a part of my current job last year. Even before the crisis of Q3-Q4 in 2008, both had been quite reluctant to take small clients and have been actively trying to get rid of smaller clients. Last I had interacted, post the crisis, the fees etc for smaller outfits were substantially increased compared to larger outfits.
Last edited by pb273 on June 23rd, 2009, 10:00 pm, edited 1 time in total.

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

### Which Prime Broker for a Startup HF?

try NewEdge - i think its merger of Soc Gen and some other outfit.
knowledge comes, wisdom lingers

Marine
Posts: 395
Joined: July 17th, 2003, 7:56 am

### Which Prime Broker for a Startup HF?

Interactive Brokers is pretty good.

PaperCut
Posts: 1616
Joined: May 14th, 2004, 6:45 pm

### Which Prime Broker for a Startup HF?

QuoteOriginally posted by: pb273QuoteOriginally posted by: PaperCutThe way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.Strange. That's a bit different from my experience. I had dealt with both Citi and GS as a part of my current job last year. Even before the crisis of Q3-Q4 in 2008, both had been quite reluctant to take small clients and have been actively trying to get rid of smaller clients. Last I had interacted, post the crisis, the fees etc for smaller outfits were substantially increased compared to larger outfits.Well I guess the world has changed. My experience was back in 01-04, when liquidity was, well, liquid. It was a beautiful world, back in those days.

Fermion
Posts: 4486
Joined: November 14th, 2002, 8:50 pm

### Which Prime Broker for a Startup HF?

In my limited experience, a big hurdle for small outfits is the minimum capital required for portfolio margining. (Typically $500K -$5M, depending on broker.) Separate margining on individual trades, however much they are mutually hedging, can seriously limit your leverage.When I looked into this, it seemed to be the critical factor.

pb273
Topic Author
Posts: 670
Joined: July 14th, 2002, 3:00 am

### Which Prime Broker for a Startup HF?

QuoteOriginally posted by: FermionIn my limited experience, a big hurdle for small outfits is the minimum capital required for portfolio margining. (Typically $500K -$5M, depending on broker.) Separate margining on individual trades, however much they are mutually hedging, can seriously limit your leverage.When I looked into this, it seemed to be the critical factor.with a high likelihood it is going to be less than \$5m. but i am not planning a very levered outfit, although the availability of shorts via the prime broker is a big concern to me.gardener3, marine, thanks for the links. I wasn't even aware IB provided PB services, I had always clicked on the individuals section before. saratoga prime is another outfit i have given a thought to.daveangel: newedge is a large PB, often considered on par with some of the bigger PB firms.