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Transforming “Broker Vote” to Research Budgeting

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Frost Consulting has developed a proprietary methodology that allows asset managers to transform their existing “Broker-Vote”/Research Commission Allocation Process into a Research Budgeting structure.

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Frost Method Research Valuation Factor Attribution Framework (TM)

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Regulatory Objectives
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  • Meet FCA requirements under PS 14/7

  • Comply with likely requirements under MiFID II

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Research Budget Design
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This proprietary process uses existing asset manager data outputs which are first normalized and then customized to reflect a variety of firm/fund specific variables to construct robust fund-level multi-asset class research budgets.

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For more information: info@frostconsulting.co.uk

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Research Budget Implementation
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Working with senior management, compliance and execution to design payment mechanisms that:

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  • Meet or exceed regulatory requirements

  • Leverage existing execution patterns/requirements - where appropriate

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Historic Research Commission Analysis
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“Backtesting Research Commissions” Frost has developed a methodology that allows asset managers to model different research commission outcomes. The first step is a historical analysis of actual research commission paid, based on AUM, portfolio turnover, net performance and inflows/outflows.

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This is compared against a “budgeted” approach starting with the actual research commissions in the first year of the survey and projecting mutiple “budgeted” approaches thereafter.

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While the results will vary, based on a number of factors, in multiple cases susbstantial research commission savings (in the 10s of percents over time) have been demonstrated - while simultaneously ensuring that the investment professionals recieve the critical external research they require.

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Not only were the savings directly accretive to performance, but the unified commission framework created high levels of transparency for clients and regulators.

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UK FCA Position on “Broker Vote” Methodologies

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Download PDF: FCA - Broker Vote Analysis

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For more information contact info@frostconsulting.co.uk

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