Citigroup is looking to boost its prime finance unit by 20 percent this year as it looks to win more business from hedge fund clients, and compete more aggressively against dominant players Goldman Sachs and Morgan Stanley.
Citi is looking to fill investment banking jobs in its capital introduction, OTC, client service and futures teams, reports Reuters. It’s in response to the growing demand from hedge funds setting up businesses in the region.
“We have been getting a number of new sole mandates and we are seeing second and third mandates coming in from existing Asia managers as well,” said Hannah Goodwin, head of prime finance in Asia-Pacific for Citigroup. “That has been a growth story for us and I think that’s going to continue.”
Prime brokers provide services to hedge funds, such as clearing trades and lending money. The business advantage to a hedge fund of using a Prime Broker is that the Prime Broker provides a centralized securities clearing facility for the hedge fund, and the hedge fund’s collateral requirements are netted across all deals handled by the Prime Broker.
The hiring spree by Citigroup and other players in the region may have been spawned by the anxiety over counterparty risk created by the recent financial crisis. The crisis forced hedge funds to look for multiple prime brokers to mitigate some of that risk. Before 2008, in contrast, Goldman Sachs and Morgan Stanley had cornered about 60 percent of the market for prime brokerage. Today, their share has been cut in half, with other players such as Credit Suisse Group AG, Deutsche Bank and UBS AG muscling into the market.
Citigroup’s ability to provide a broad array of services, from custody and fund administration to trading execution and financing and potentially even distribution, is a selling point for the firm. Citigroup’s prime finance unit oversees $6.69 billion from 90 hedge fund clients, including 51 sole mandates, according to data from AsiaHedge and reported by Reuters.
Would a position in prime brokerage be part of your career plans? Would you consider relocating to Asia? Add your comments below.