A new survey on research and execution launched last Monday by consultancy Investit enables investment management firms to compare what price they pay for research and execution, according to the firm.
The survey aims to give managers the information they need to negotiate external research costs, demonstrate careful commission management to clients and compare the consumption of research by their analysts.
Investit says it has developed the survey in conjunction with a panel of investment management firms. Gathering information on both the cost of external research and different types of execution services, the survey will enable investment management firms to benchmark against peers, negotiate with providers, manage research spend and demonstrate transparency, says the firm.
"An important cost for institutions, namely broking commission, is subject to insufficient scrutiny," explained Paul Myners in his review of institutional investment in the UK, published in 2001. Although unbundling legislation PS05/9 separated payment for external research from execution, the external research market remains very opaque, according to Investit. Brokers providing research are paid from execution-linked commission negotiated separately with each manager and have proved unwilling to publish price lists, says the consultancy.
"Fund managers and the Financial Services Authority (FSA) have been looking for a solution to make the market in services bought from brokers with client commission more transparent," comments Richard Phillipson, principal consultant, Investit. "This survey helps meet that need. Fund managers can now compare what is paid for a range of broker services with what their peers are paying. Up until now only the brokers knew what all the managers were spending; this helps close the information gap," he states.