Client Type: Global Hedge Fund
Sector: Multi-Strategy / Prime Broker Relationships
Location: United Kingdom
Challenge:
Market shocks – from the GFC to COVID to recent volatility – often trigger sudden tightening of margin requirements by prime brokers. These events create widespread liquidity strain, forcing funds into fire-sale liquidations. To avoid being reactive under pressure, the fund sought a proactive liquidity strategy to safeguard against future shocks.
Solution:
- Negotiated long-term margining agreements with key prime brokers
- Secured 6- to 18-month advance notice before any haircut increases or changes to margining models
- Agreed terms at no additional cost or with a modest 10% premium over standard models
- Built a liquidity buffer by locking in terms before stress emerged, paying a small premium during benign periods to gain certainty during chaos
Result:
- Avoided forced liquidations during multiple crises, including the GFC
- Preserved capital in high-carry, illiquid positions
- Maintained full trading flexibility while peers de-levered
- Capitalised on distressed market dislocations – deploying capital on pre-agreed terms while others sold under pressure
Value Delivered:
Turned margin risk into a strategic asset – protecting the downside while enabling offensive moves when markets broke. A liquidity moat that paid off when it mattered most.