Ernst & Young (EY) recently took the pulse of the prime brokerage industry by surveying executives from eight leading prime brokers, each of which operates as part of a global bank or other global financial institution.  It found that prime brokers have been facing “crucial challenges” and urged prime brokers to learn the actual profitability of their respective hedge fund clients in order to price their services appropriately.  EY asked survey participants about a number of topics, including their organizational structure, processes for onboarding clients, liquidity management, revenue allocation, lockup agreements and leverage arrangements.  In that regard, the report provides useful insights for hedge fund managers into how prime brokers evaluate and manage their hedge fund business.  For the hedge fund manager’s perspective on such matters, see “Prime Brokerage Arrangements from the Hedge Fund Manager Perspective: Financing Structures; Trends in Services; Counterparty Risk; and Negotiating Agreements,” Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013).  This article summarizes the key findings from EY’s survey.