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Is Multi-Asset Prime Brokerage Becoming Essential for the Modern Hedge Fund?

17 February 2026

By Chris Edwards

Many argue that the global financial crisis permanently changed the relationship between hedge funds and their prime brokers. Prior to 2008, South African equity managers were typically running relatively niche, domestically focused equity long-short or market-neutral strategies, whilst fixed income managers focused local exposure, largely centred on sovereign debt, often managed and financed in relative isolation. But the aftermath of 2008 forced managers to confront how closely counterparty strength and balance sheet resilience were tied to their ability to run those strategies.

The buy side diversified counterparty risk by moving to a multi-prime broker model, something that is all too familiar today, while advances in electronic trading and cross-asset modelling expanded the range of instruments that could be traded within a single portfolio, setting the stage for multi-asset strategies that now differentiate prime brokers in the market.

Managers are now able to invest more broadly within defined mandates that permit international exposure, with access to instruments across markets and asset classes that allow for far more diversified, globally integrated portfolios. For prime brokers, that has meant meeting those requirements in practice, from providing access to global markets and traded instruments to understanding the risk embedded in more complex underlying portfolios and structuring solutions that allow managers to implement these strategies effectively.

A significant amount of time and effort goes into developing multi-asset class margin models that assess portfolio risk across instruments, geographies, and asset classes. The objective is to provide fund managers with margin requirements that are both optimised and competitively priced, ensuring they are not unduly penalised through excessive collateral posting relative to the risk embedded in their portfolios. That requires looking at portfolio-level risk and the correlations that exist across asset classes, rather than treating exposures in isolation. By doing so, prime brokers ensure managers achieve the most efficient use of collateral possible, effectively maximising the value of what they post against the risks they are running.

That focus on portfolio-level risk and collateral efficiency has become even more important as regulatory requirements evolve in specific markets, South Africa being a clear example.

Local regulators are implementing reforms aligned with global initiatives to strengthen the regulation of Over-The-Counter (OTC) derivatives, most notably through the introduction of initial margin requirements for non-centrally cleared derivatives. This staged approach has had a penal effect on hedge funds that make active use of derivatives within their portfolios, materially increasing collateral requirements for instruments such as interest rate swaps and related derivatives. For funds with limited balance sheet capacity, those requirements can quickly become prohibitive relative to the capital they manage.

From a prime brokerage perspective, this is where platform capability and model sophistication matter, and some banks have moved quickly to adapt. Absa, for example, has invested heavily in developing solutions that offer managers alternative ways to meet these regulatory requirements, allowing them to collateralise exposures more efficiently. In some cases, that has been critical in enabling funds to remain viable.

This is not about circumventing regulation, but about interpreting it properly and adapting to it, finding workable solutions that sit within the rules while allowing managers to continue operating strategies that would otherwise struggle to be sustained. Recognising offsets and correlations across asset classes becomes a practical requirement for supporting multi-asset portfolios efficiently under modern regulatory regimes.

As portfolios become more complex, the way strategies are packaged and delivered has changed too.

The traditional fund structure is transforming with the growth of actively managed certificates, actively managed ETFs, and other delivery or access channels. Managers are therefore exploring alternative ways of deploying their strategies, and their choice of platform provider is being influenced by the ability to support multiple structures at once. That includes supporting traditional fund infrastructure alongside AMCs, segregated or separately managed accounts, and other tailored vehicles.

With strategies expressed through a broader set of channels, managers are looking for prime brokers that can meet those requirements in parallel rather than forcing trade-offs between them. What this means is that prime brokers will need to evolve to support and deliver services beyond liquidity and execution if they are to support the growing call for diversified, multi-asset investment strategies.

Chris Edwards, Managing Director and Head of the Prime Services, and the Index & Structured Solutions businesses at Absa Bank

17 February 2026

By Chris Edwards

Many argue that the global financial crisis permanently changed the relationship between hedge funds and their prime brokers. Prior to 2008, South African equity managers were typically running relatively niche, domestically focused equity long-short or market-neutral strategies, whilst fixed income managers focused local exposure, largely centred on sovereign debt, often managed and financed in relative isolation. But the aftermath of 2008 forced managers to confront how closely counterparty strength and balance sheet resilience were tied to their ability to run those strategies.

The buy side diversified counterparty risk by moving to a multi-prime broker model, something that is all too familiar today, while advances in electronic trading and cross-asset modelling expanded the range of instruments that could be traded within a single portfolio, setting the stage for multi-asset strategies that now differentiate prime brokers in the market.

Managers are now able to invest more broadly within defined mandates that permit international exposure, with access to instruments across markets and asset classes that allow for far more diversified, globally integrated portfolios. For prime brokers, that has meant meeting those requirements in practice, from providing access to global markets and traded instruments to understanding the risk embedded in more complex underlying portfolios and structuring solutions that allow managers to implement these strategies effectively.

A significant amount of time and effort goes into developing multi-asset class margin models that assess portfolio risk across instruments, geographies, and asset classes. The objective is to provide fund managers with margin requirements that are both optimised and competitively priced, ensuring they are not unduly penalised through excessive collateral posting relative to the risk embedded in their portfolios. That requires looking at portfolio-level risk and the correlations that exist across asset classes, rather than treating exposures in isolation. By doing so, prime brokers ensure managers achieve the most efficient use of collateral possible, effectively maximising the value of what they post against the risks they are running.

That focus on portfolio-level risk and collateral efficiency has become even more important as regulatory requirements evolve in specific markets, South Africa being a clear example.

Local regulators are implementing reforms aligned with global initiatives to strengthen the regulation of Over-The-Counter (OTC) derivatives, most notably through the introduction of initial margin requirements for non-centrally cleared derivatives. This staged approach has had a penal effect on hedge funds that make active use of derivatives within their portfolios, materially increasing collateral requirements for instruments such as interest rate swaps and related derivatives. For funds with limited balance sheet capacity, those requirements can quickly become prohibitive relative to the capital they manage.

From a prime brokerage perspective, this is where platform capability and model sophistication matter, and some banks have moved quickly to adapt. Absa, for example, has invested heavily in developing solutions that offer managers alternative ways to meet these regulatory requirements, allowing them to collateralise exposures more efficiently. In some cases, that has been critical in enabling funds to remain viable.

This is not about circumventing regulation, but about interpreting it properly and adapting to it, finding workable solutions that sit within the rules while allowing managers to continue operating strategies that would otherwise struggle to be sustained. Recognising offsets and correlations across asset classes becomes a practical requirement for supporting multi-asset portfolios efficiently under modern regulatory regimes.

As portfolios become more complex, the way strategies are packaged and delivered has changed too.

The traditional fund structure is transforming with the growth of actively managed certificates, actively managed ETFs, and other delivery or access channels. Managers are therefore exploring alternative ways of deploying their strategies, and their choice of platform provider is being influenced by the ability to support multiple structures at once. That includes supporting traditional fund infrastructure alongside AMCs, segregated or separately managed accounts, and other tailored vehicles.

With strategies expressed through a broader set of channels, managers are looking for prime brokers that can meet those requirements in parallel rather than forcing trade-offs between them. What this means is that prime brokers will need to evolve to support and deliver services beyond liquidity and execution if they are to support the growing call for diversified, multi-asset investment strategies.

Chris Edwards, Managing Director and Head of the Prime Services, and the Index & Structured Solutions businesses at Absa Bank