HSBC Holdings Plc, the largest European bank by assets, plans to double its Asia-Pacific prime finance team’s cut of hedge-fund assets in the coming year, said Melvyn Ford, regional head of the business.
It is part of a target to improve its standing by two places to the region’s sixth-largest prime broker over the 12 months, Ford said in an interview in Hong Kong yesterday. HSBC was ranked eighth in its first full year in a survey by trade journal AsiaHedge released this month.
HSBC was a late entrant to the Asia-Pacific prime brokerage market dominated by the likes of Goldman Sachs Group Inc., Morgan Stanley and Credit Suisse Group AG. Banks are competing for regional hedge-fund assets that slipped 1 percent to $139 billion in 2012 after the closures of those unable to cope with falling revenue and rising costs that cut the number of funds by 5 percent, according to AsiaHedge.
“For everyone, it has been a challenging year,” said Ford. “We definitely announced our arrival. We’re trying to pick the clients and partner with clients that really want to be trading counterparts of HSBC.”
HSBC has been the biggest hedge-fund administrator in the region, according to AsiaHedge. It secured 33 sole and shared prime-brokerage mandates from regional hedge funds, 24 of them from those based in Hong Kong and China, according to the survey. Prime brokers offer services such as trade settlement, cash and securities lending to hedge funds.
Ford didn’t give a figure for the amount of cash and securities that the funds placed with the regional team. AsiaHedge’s survey estimated it at $3 billion.
More than 80 percent of HSBC’s Asian prime-brokerage clients are established managers, which have been operating for some time, Matthew Kiraly, head of sales and marketing on the Asia-Pacific prime finance team, said during the interview. About seven of the 10 largest China-focused managers are clients of HSBC’s prime-brokerage unit, he added.
“I don’t envisage us taking a huge number of new prime clients based in the region, maybe between five and 10 a year,” said Ford.
Instead, the team will focus on allocating the necessary resources to each client to encourage them to do more business with HSBC, including borrowing more from the bank and placing a bigger share of assets with it, Kiraly said.
The bank will increase its focus on the U.S. and Singapore in the next few months after targeting initial efforts at funds based in Greater China, said Kiraly.
As much as 70 percent of Asian prime-brokerage revenue is still generated from U.S.-based clients, said Ford.
HSBC’s Asian prime-brokerage team initially focused on recruiting equity long-short managers, who bet on rising and falling stock prices. It is looking to expand its clients among multistrategy funds that trade various asset classes using different approaches to take advantage of the bank’s traditional strength in fixed-income and foreign-currency markets, said Kiraly.
HSBC was the second-largest underwriter of Asia-Pacific debt offerings last year as well as the 11th-largest arranger of equity and equity-linked securities sales, according to data compiled by Bloomberg.