The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Fund Managers Fall Short on Reviewing Broker Performance

Fund managers are falling short on calculating the implicit costs of trading, and on a broader scale are unaware as to exactly how much money is being spent with brokers due to a failure to fully review all their relationships qualitatively and quantitatively.

According to research from OpenGamma, a provider of derivatives analytics, despite the majority of fund managers having formal broker review processes in place, only 11% assess how all their brokers are actually performing. Prime-brokers, under the spotlight recently about whether or not they are charging a fair price to finance fund managers making speculative bets, are the group reviewed most frequently.

The study was carried out over a two-month period across 22 investment management firms. In terms of whether or not fund managers are calculating the implicit costs of trading, findings show that implicit costs, the costs of bid-offer spreads, were only calculated by half of firms, although analysing implicit trading costs has become key to understanding the real value of broker relationships.

For fund managers, the challenges include collecting and calculating data, which is becoming ‘very time consuming’, leading the majority (75%) of respondents planning to enhance their operational processes over the next year.

Commenting on the results, Maxime Jeanniard du Dot, chief operating officer at OpenGamma, says: “Having a process for assessing how brokers are performing is without question very valuable, but only when carried out. While regulations will be a big driver in reviewing broker performance, fund managers also have a strict fiduciary responsibility to investors. On top of this, as the geopolitical landscape begins to take shape over the coming months, it is clear that fund managers will need to gain a new level of insight to understand the best brokers to do business with.”

Related content

WEBINAR

Recorded Webinar: Driving business value from the LEI

Don’t miss this opportunity to view the recording of this recently held webinar. The Legal Entity Identifier (LEI) has become a viable standard to help financial institutions identify business entities that are party to financial transactions and fulfil regulatory obligations for entity data. Linked to third-party, corporate hierarchy and beneficial ownership data, the potential of...

BLOG

TP ICAP Sets Up Parameta Solutions as New Brand for Data, Analytics and Post-Trade Offerings

TP ICAP has set up a new business, Parameta Solutions, to provide a flagship brand for its data and analytics division. It is due to be opened officially next week. Parameta’s data and analytics offerings will include unbiased OTC content and proprietary data, in-depth insights across price discovery, risk management, benchmarks and indices, and pre...

EVENT

Virtual Briefing: ESG Data Management – A Strategic Imperative

This briefing will explore challenges around assembling and evaluating ESG data for reporting and the impact of regulatory measures and industry collaboration on transparency and standardisation efforts. Expert speakers will address how the evolving market infrastructure is developing and the role of new technologies and alternative data in improving insight and filling data gaps.

GUIDE

Best Practice Client Onboarding

Client onboarding is central to the success of banks, yet it continues to present challenges and the benefits of getting it right are difficult to achieve. The challenges arise from siloed systems, manual processes and poor entity data quality. The potential benefits of successful implementation include excellent client experience, improved client acquisition and loyalty, new business opportunities, reductions in costs, competitive advantage, and confidence in compliance.