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Wednesday June 09, 10:45
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Lehman eyes bigger share of Asia hedge fund trade
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Lehman Brothers Holdings Inc., which retreated from some of its Asian operations in the late 1990s, is expanding again as it competes for a share of the region’s growing hedge fund and institutional business.
New York-based Lehman is boosting its prime brokerage operations in Hong Kong and other markets and adding direct stock trading in Australia. It also opened a branch in Taiwan in November to focus on the stock market.
"We made the decision, considering the growth in Korea, Taiwan and certainly Hong Kong, that we needed a strong hedge fund position," Richard Story, head of the firm’s European prime brokerage group, told Reuters in a phone interview from London.
"We’re confident that we are one of five or six firms that have the global reach and global power to take five to eight percent-plus market share in Asia," he said.
Lehman’s renewed commitment to Asia reflects the increasingly competitive scramble for a share of the region’s hedge fund assets, estimated at $40 billion this year. That’s a fraction of the nearly $1 trillion in assets held by hedge funds globally, but Asia’s rise in high net-worth individuals that favour such funds is drawing attention.
Asia’s prime brokerage business, which provides hedge funds with everything from loans to office space, has long been dominated by Goldman Sachs and Morgan Stanley. Credit Suisse First Boston, Merrill Lynch and ABN AMRO are among the other firms seeking a share of the market.
But even as Lehman expands in some locations, it is making strategic cuts in others. In December, Lehman, which has its regional headquarters in Tokyo, agreed to sell most of its Global Thai Finance unit to local management.
The renewed growth is a sharp reversal of it’s retrenchment in the midst of the Asian financial crisis in the late 1990s. At that time, Lehman sold its brokerage business and consolidated its regional equities group in Tokyo in one of the more dramatic restructurings by an investment bank.
Lehman, with 16,500 employees worldwide, is smaller than many of its global rivals. Merrill has about 48,200 employees and Morgan Stanley has nearly 51,000, for instance.
Story said Lehman’s smaller size was a competitive advantage, fostering easier communication between different teams. He said hedge funds don’t want to talk to one person for a stock deal and another for a futures transaction.
Hedge funds, which seek higher returns through a variety of intricate trading styles, are becoming big revenue sources for investment banks, due to their active trading patterns and reliance on extra services, which also generate fees.
The company is on track to double its revenues from hedge funds in 2004, Story said.
TAIWAN, AUSTRALIA EXPANSION
Lehman opened a Taiwan branch in November, enabling it to trade in all listed securities on the country’s main exchange.
The firm also plans to offer direct trading in Australian stocks to clients who are interested in one of the region’s more developed markets.
Tim Throsby, Lehman’s head of Asia equities in Tokyo, told Reuters, said the firm is exploring further expansion in Australia.
Lehman’s clients will be able to trade Australian stocks through their Lehman accounts. In the past, Lehman would have to take an order from a client and go through a local broker, Throsby said.
"We think the quality of our execution will improve and we think the price of what we can offer will improve," he said.
(Reuters)
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