To mitigate the risks arising from potential prime broker failure or malfeasance, fund managers have looked beyond individual arrangements with brokers to broader structural changes, such as reallocating some of the risk to third parties. This can be accomplished by using multiple prime brokers (multi-prime arrangements) or by engaging a third-party custodian to hold some or, in rare instances, all assets separate from the prime broker (split custodian-broker arrangements). While each approach varies in effectiveness with respect to mitigating prime brokerage risk, there are also various factors and potential downsides for fund managers to evaluate when considering any such arrangement. This article, the second in a three-part series, outlines the various nuances of multi-prime and split custodian-broker arrangements to enable fund managers to evaluate the ability of each to mitigate the risk posed by their prime brokers. The first article in this series detailed preliminary considerations for fund managers before engaging prime brokers, including the various types of services available and the ways that managers can perform diligence on the creditworthiness of prime brokers. The third article will examine various legal protections – including with respect to sub-custodians and cross-default provisions – that can be negotiated in prime brokerage agreements to mitigate risk from the arrangement. For more on mitigating risk from prime brokers, see “In Frozen Credit Markets, Enhanced Prime Brokerage Arrangements Offer a Rare Source of Hedge Fund Leverage, but Not Without Legal Risk” (Feb. 26, 2009); and “How Can Hedge Funds Structure Their Prime Brokerage Arrangements to Protect Themselves?” (Oct. 10, 2008).