{"title":"Do prime brokers intermediate capital?","authors":"Andrew J. Sinclair","doi":"10.1016/j.jfi.2022.101004","DOIUrl":null,"url":null,"abstract":"<div><p>Prime brokers play an important role in intermediating arbitrage capital to hedge funds. A fund’s peer-group ranking, relative to funds that share the same prime broker, significantly affects how investors respond to its past performance. I decompose the standard performance-flow relationship into two components: (1) flows that respond to overall performance rank, and (2) flows that respond to relative (within prime broker) performance rank. Strong <em>relative</em> rank drives fund in-flows, while poor <em>overall</em> rank drives out-flows. These results suggest that prime brokers intermediate about 40% of the standard performance-flow relationship.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"53 ","pages":"Article 101004"},"PeriodicalIF":3.1000,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Financial Intermediation","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042957322000572","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Prime brokers play an important role in intermediating arbitrage capital to hedge funds. A fund’s peer-group ranking, relative to funds that share the same prime broker, significantly affects how investors respond to its past performance. I decompose the standard performance-flow relationship into two components: (1) flows that respond to overall performance rank, and (2) flows that respond to relative (within prime broker) performance rank. Strong relative rank drives fund in-flows, while poor overall rank drives out-flows. These results suggest that prime brokers intermediate about 40% of the standard performance-flow relationship.
期刊介绍：
The Journal of Financial Intermediation seeks to publish research in the broad areas of financial intermediation, financial market structure, corporate finance, risk management, and valuation.
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