Fund managers are often left in the dark over broker performance due to poor quality reviewing, a study has claimed.
Only 11% of fund managers assess how all their brokers are actually performing despite having formal broker review processes in place, according to the report by analytics firm OpenGamma.
Many asset managers may be unaware as to exactly where and how much money is being spent with brokers because of a failure to analyse all their relationships qualitatively and quantitatively.
“Having a process for assessing how brokers are performing is without question very valuable, but only when carried out,” said OpenGamma chief operating officer Maxime Jeanniard du Dot.
“While regulations will be a big driver in reviewing broker performance, fund managers also have a strict fiduciary responsibility to investors.”
The research also found that implicit trading costs were only calculated by half of the firms surveyed.
According to OpenGamma, analysing these costs has become one of the key ways to understand the real value of broker relationships, as fund managers continue to come under heavy pressure to deliver greater returns.
The group of brokers most reviewed were prime-brokers – recently under the spotlight over whether or not they are charging a fair price to finance fund managers making speculative bets, as stated by OpenGamma.
The study was carried out over a two month period across 22 investment management firms.
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