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Leverage terms and margin constraints push prime brokerage competition, says report
28 July 2026 US, UK
Image: Елена_Бутусова/stock.adobe.com
The number of hedge funds willing to switch prime brokers for better financing and leverage terms is on the rise, according to a new report, which highlights opportunities for new and established players with balance sheet capacity to target under-served market corners.
The report — from management intelligence platform Acuiti and global multi-asset SaaS platform TS Imagine — states that prime brokers have become more selective in their offerings to hedge funds since the implementation of Basel III.
More than half of respondents have had leverage reduced or margin requirements tightened on multiple occasions over the past five years, with 71 per cent reporting a reduction in trading scope or volumes as a result and 53 per cent citing lower returns for the fund.
57 per cent of respondents said they had switched or considered switching prime brokers due to financing costs or leverage terms, and 55 per cent said they would find it easy to onboard with another provider.
Ross Lancaster, head of research at Acuiti, says: “Prime brokers’ ability to provide leverage has largely survived the post-crisis capital regime, but beyond the aggregate picture there are significant kinks in the system.
“Funds with lower AUM or more niche strategies are consistently under-served, and as with any market inefficiency, that creates an opening for new providers.
“The next phase of competition will be won on margin transparency, data quality, and analytics rather than the traditional value-add services that funds are increasingly discounting.”
Haircut negotiation, responsiveness to margin relief requests, and the clarity and consistency of margin methodology all emerged as points of frustration, with 60 per cent of respondents reporting some lack of clarity over how leverage is determined.
Satisfaction with traditional value-add services is down across the board, with 61 per cent giving a negative view on capital introduction provided by prime brokers.
EJ Liotta, head of prime finance and equity derivatives at TS Imagine, adds: “The research confirms what TS Imagine is seeing across the market: demand for prime brokerage services continues to expand as hedge funds grow in scale and increasingly adopt complex, multi-asset investment strategies.
“At the same time, post-crisis capital requirements have made balance sheet capacity a critical consideration for prime brokers themselves, creating new challenges around financing, collateral, and liquidity management. As a result, margin and capital efficiency are becoming increasingly important areas of focus across the industry.”
The report — from management intelligence platform Acuiti and global multi-asset SaaS platform TS Imagine — states that prime brokers have become more selective in their offerings to hedge funds since the implementation of Basel III.
More than half of respondents have had leverage reduced or margin requirements tightened on multiple occasions over the past five years, with 71 per cent reporting a reduction in trading scope or volumes as a result and 53 per cent citing lower returns for the fund.
57 per cent of respondents said they had switched or considered switching prime brokers due to financing costs or leverage terms, and 55 per cent said they would find it easy to onboard with another provider.
Ross Lancaster, head of research at Acuiti, says: “Prime brokers’ ability to provide leverage has largely survived the post-crisis capital regime, but beyond the aggregate picture there are significant kinks in the system.
“Funds with lower AUM or more niche strategies are consistently under-served, and as with any market inefficiency, that creates an opening for new providers.
“The next phase of competition will be won on margin transparency, data quality, and analytics rather than the traditional value-add services that funds are increasingly discounting.”
Haircut negotiation, responsiveness to margin relief requests, and the clarity and consistency of margin methodology all emerged as points of frustration, with 60 per cent of respondents reporting some lack of clarity over how leverage is determined.
Satisfaction with traditional value-add services is down across the board, with 61 per cent giving a negative view on capital introduction provided by prime brokers.
EJ Liotta, head of prime finance and equity derivatives at TS Imagine, adds: “The research confirms what TS Imagine is seeing across the market: demand for prime brokerage services continues to expand as hedge funds grow in scale and increasingly adopt complex, multi-asset investment strategies.
“At the same time, post-crisis capital requirements have made balance sheet capacity a critical consideration for prime brokers themselves, creating new challenges around financing, collateral, and liquidity management. As a result, margin and capital efficiency are becoming increasingly important areas of focus across the industry.”
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