Credit Suisse and Deutsche Bank ranked as the best prime brokerages of 2008 in a closely followed survey due out this week, a copy of which was reviewed by Dow Jones Newswires.

The annual survey of hedge funds, conducted by Global Custodian magazine, had about 25% fewer respondents than last year - not surprising considering the global economic meltdown and shrinking of the hedge-fund industry.

Credit Suisse narrowly outscored Deutsche Bank - last year's winner - although Deutsche Bank got more "best in class" awards.

Last year, Credit Suisse ranked seventh, and part of its move up can be attributed to the collapse of some banks and mergers between others.

Prime brokerage businesses of Bear Stearns and Lehman Bros. are now run by JPMorgan Chase & Co. (JPM) and Barclays PLC (BCS), respectively, and Bank of America Corp. (BAC) and Merrill Lynch have merged.

Philip Vasan, head of Credit Suisse Prime Services, said another reason for finishing first is that since he's taken over in 2003, the company has been very selective in which hedge fund clients it's dealt with.

"Credit Suisse was routinely selecting less than half the hedge funds that it might have all these years," Vasan said.

Global Custodian's rankings are based on a weighted average of prime brokerages' performance in such categories as financing, client services, technology and margining. Results from the survey, the most closely watched in the hedge-fund industry, are presented in a format similar to the popular Zagat restaurant guides, with direct quotes from participants making up a bulk of the commentary on each company.

Citigroup Inc.'s (C) prime brokerage came in third, followed by JPMorgan, Barclays, and the combined Bank of America/Merrill Lynch. Goldman Sachs Group Inc. (GS) finished seventh. UBS AG (UBS), Newedge and RBC Capital Markets rounded out the list. Goldman and Deutsche Bank are believed to be the two largest prime brokerages in terms of market share, which isn't considered in the rankings.

Barry Bausano, who along with Jonathan Hitchon serves as co-head of Deutsche's global prime finance business, said hedge fund managers' increasing tendency to use multiple prime brokerages and shy away from risk have been major factors in both the market share gain, and positive survey results.

"Deutsche Bank was perceived as having successfully navigated the subprime crisis, and that halo effect benefited the prime brokerage," Bausano said.

Before the high-profile collapses of Lehman and Bear Stearns, many hedge-fund managers weren't terribly concerned with counterparty risks involved with their prime brokerages. But after reality set in that these could lead to margin calls and losses, more managers spread money across multiple prime brokers, especially less risky ones.

While counterparty risk isn't one of the categories measured in Global Custodian's rankings, concerns about risk are a big reason for the shift by many hedge funds to multiple prime brokers.

-By Joseph Checkler; Dow Jones Newswires; 201-938-4297; joseph.checkler@dowjones.com