Long Story Short: How Hedge Fund Managers Can Get the Most Out of a Tri-Party Custody Relationship

摘要

Increased concerns around counterparty risk have prompted hedge fund managers to implement tri-party custody arrangements. These arrangements structure a process by which managers can transfer a portion of their long assets and cash to bank custodians while continuing to seek financing resources from prime brokers. Managers can utilize a portion of the long assets held at the bank custodian to collateralize debt financing and short positions held at the prime broker. A tri-party custody arrangement enables hedge fund managers to take advantage of both the financial strength and account protection that is offered by a bank custodian.