Prime brokers have seen a flight to quality by hedge fund clients, who have transferred up to $50bn (€37bn) of assets from higher-risk banks to the prime brokerage operations of commercial banks with bigger balance sheets and better credit ratings.

The transfer of business in the past two weeks, which according to prime brokers and hedge funds has hit Bear Stearns and Lehman Brothers, marks the start of a shake-out in the lucrative and competitive prime broking industry.