Hedge funds seek Basel III solution

SearchHedge funds are struggling to see how Basel III, the global set of capital adequacy rules for banks, will impact their cost of doing business, a major industry trade body says.

The Alternative Investment Management Association (Aima) wants to find a way for hedge funds to deal more easily with their bank counterparties – principally prime brokers – in the Basel III environment.

Aima’s action starts with a survey, carried out with financial analytics firm S3 Partners, to measure and assess how rules stemming from Basel III are affecting cost and capacity in the prime brokerage industry.

Jack Inglis, Aima’s chief executive officer, says although the impact of Basel III on banks is well understood, hedge fund management firms are struggling to see what impact the capital requirements will have on their cost of doing business.   

“With this survey, we are hoping to cut through some of the noise and better understand what managers have seen so far and how they expect their relationships with their prime brokers and other financing counterparties to change,” he adds.

The survey also aims to establish standard definitions for fundamental concepts such as “optimisation”, “collateral management” and “reconciliation”, which are key to how hedge fund and asset management clients assess their commercial relationships with banks.

The results of the survey will be published later this year.

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