lehman-factor-imperils-hedge-funds

Lehman factor imperils hedge funds

Prime broking contracts stipulate that Lehman can treat hedge-fund clients' assets as its own, putting an untold amount of fund assets at risk; but Japanese regulators move to ensure an orderly unwinding.
Hedge funds may be jeopardised by the collapse of Lehman Brothers. LehmanÆs prime broking operation, whilst not at the magnitude of Morgan Stanley and Goldman Sachs, had a presence in Asia, especially in Japan. Their customers want to know what will happen next.

It appears at this early stage that fully paid securities held in client names are safe. However, assets pledged by a hedge fund as original and variation margin for a loan will go into the pot of the individual Lehman unit, with the hedge fund becoming an unsecured creditor.

If the assets were pledged, they have been re-hypothecated and lent out to somebody else. The prime brokerage has the right to take...
¬ Haymarket Media Limited. All rights reserved.

FinanceAsia has updated its subscription model.

Registered readers now have the opportunity to read 5 articles from our award-winning website for free.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team (2-10 users), or office-wide licences.

To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222

Article limit is reached.

Hello! You have used up all of your free articles on FinanceAsia.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team (2-10 users), or office-wide licences. To help you and your colleagues access our proprietary content, please contact us at subscriptions@financeasia.com, or +(852) 2122 5222