Standard Bank going for prime brokerage

Standard Bank Group plans to start a prime brokerage next month to benefit from regulatory changes in SA it expects will boost the hedge fund industry.

The company anticipates having five hedge fund clients by the end of the year, said Andy Hall, head of global markets at Standard Bank. The lender will compete against Peregrine Holdings and units of FirstRand, Deutsche Bank, Investec Plc and Barclays Africa Group.

“There’s still a big bite to eat in the significant growth we expect in hedge funds,” he said. The lender is also being encouraged by guidelines recommending asset managers hire more than one prime broker, Hall said.

The business forms an important part of Standard Bank’s efforts to improve cost efficiencies and add clients within its global markets unit, which accounted for 20% of its earnings before one-time items in 2016. The global markets division oversees its trading activities on the continent in commodities, foreign exchange and credit, as well as structuring and exchange traded funds.

Standard Bank is counting on using its estimated 60% share of the SA securities-lending market to bolster the prime brokerage. Prime brokers conduct equity trades, cover margins and lend shares used in betting whether a stock price will fall or gain.

SA’s financial-services regulator in 2015 introduced rules that enhanced oversight and improved transparency for hedge funds, placing them in the same category as mutual funds. That has allowed the industry to compete for a wider investment pool which Novare Investments estimates has R3 trillion in assets. Hedge fund assets have almost doubled since 2013, according to a Novare survey in 2016. –