The Next Operational Hurdle for Hedge Funds — Collateral Management (KPMG)

April 2013

KEYWORDS: hedge funds, operational risk, rehypothecation, margin, collateral, buy-side firm, prime broker, Hedge Fund Regulation, electronic trading, OTC derivatives, swaps data repository, central clearing, risk management, market efficiency, portfolios, Department of the Treasury, FCM, margining, FINRA, global financial crisis, Dodd-Frank Act, EMIR, European Commission, segregation, ISDA, CCP, central counterparties

  • KPMG


The consequences of the market collapse of 2008 are still overshadowing the market today.

Gone are the days when hedge funds or buy-side firms would rely heavily on their counterparts’ data for the aggregation, deployment and settlement of their margin calls. Gone are the days of a single prime broker, when the re-hypothecation of assets was plentiful and profitable. The world is now a different place in the realm of collateral management.

Buy-side firms have been progressively moving to a multi-prime broker model; this trend combined with the introduction of regulatory reform is going to introduce a whole new level of operational complexity for which few buy-side firms are prepared.

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