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Bank of America Corp
Jefferies Group Inc. (JEF), an investment bank that caters to mid-size companies, hired a team of six executives from Bank of America Corp. (BAC)'s securities unit to expand its services to hedge funds.
The prime brokerage services group will be headed by Glen Dailey, former chief operating officer of prime brokerage at Banc of America Securities, New York-based Jefferies said today in a statement. Jefferies also added John Kunze, Evan Gevarter, Michael Hill, R. Penn Miller-Jones and Christopher Bianchi.
Prime brokerage has become the fastest-growing source of income from trading clients as financial institutions increasingly diversify their investing with hedge funds. Morgan Stanley, Bear Stearns & Co. and Goldman Sachs Group Inc. were all paid more last year by hedge funds for lending them shares and cash, clearing and settling trades, and other services.
``This business has become so profitable and so robust that new entrants are flooding in,'' said Denise Valentine, a New York-based analyst with financial-services consulting firm Celent Communications. ``Bank of America has had tremendous growth, tapping into a broad spectrum of clients, and they've moved up the ranks quickly. That's made them a target for extracting top talent.''
Prime-brokerage fees may increase by almost a third to $9.9 billion in 2009, said Sanford C. Bernstein & Co. analyst Brad Hintz. Pension funds, endowments, foundations and other institutional investors account for almost 40 percent of net new flows into hedge funds, compared with less than 5 percent in 2000, according to a report last year by consultants at Casey, Quirk & Associates in Darien, Connecticut.
``We see a vast opportunity to meet the needs of small and mid-sized hedge funds who are currently being underserved by Wall Street,'' Richard B. Handler, Chairman and Chief Executive Officer of Jefferies, said in the statement.
R. David Conover, who used to run Jefferies' prime brokerage business, will focus on his other role as the firm's head of correspondent clearing.
Jeffries shares rose 91 cents, or 1.6 percent, to $56.79 at 4:16 p.m. in New York Stock Exchange composite trading.
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