DBS considers hedge fund prime brokerage expansion as trading income falls 65%
Singapore's DBS Group is considering entering the hedge fund prime brokerage market as it seeks to expand its institutional trading services following a 65% decline in third-quarter markets trading income, according to a report by Finance Magnates. Chief executive Tan Su Shan said the bank is evaluating opportunities to combine its existing custody, market access and execution capabilities into a…
DBS Group, a major Singaporean financial institution, is contemplating a foray into the hedge fund prime brokerage sector as its trading revenue has plummeted by 65% in the third quarter. The bank's executive chairman, Tan Su Shan, revealed that DBS is assessing opportunities to integrate its existing custody, market access, and execution services into a comprehensive prime brokerage solution.
This could entail providing financing, securities lending, and clearing services to hedge funds and other institutional investors. However, a final decision on the venture's structure has not been made.
If implemented, DBS would join the ranks of established prime brokerage players like Goldman Sachs, JPMorgan, and Morgan Stanley. Goldman Sachs recently reported a remarkable 72% year-on-year increase in third-quarter equities revenue, with $3.37 billion of that coming from equities financing. This underscores the growing significance of hedge fund financing to leading investment banks.
DBS's interest in the prime brokerage market arises as Singapore continues to draw the attention of hedge fund managers looking to tap into Asian investment opportunities. The bank's existing financial institutions franchise and growing institutional equities business are seen as strong foundations for a broader prime services offering, according to Tan.
The proposed expansion coincides with weaker quarterly results for DBS, with net profit falling by 5% to S$2.81 billion, falling short of analysts' expectations of S$2.95 billion. Trading income also declined significantly, from S$439 million to S$152 million, due to challenging equity market conditions and rising interest rates.
Nonetheless, treasury customer income rose by 21% to a record S$2.62 billion over the first nine months of 2026. By entering the prime brokerage space, DBS aims to strengthen its ties with hedge fund clients while diversifying its institutional revenue streams, recognizing the increasing demand for financing, custody, and execution services in Asia's alternative investment industry.
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