Anatomy of a Broker Vote

Sample Broker Vote:

We have maintained our #3 position with ABC Management Company in first half of 2010 (In the prior voting period, we were also #3).
Few highlights:

Our breadth of coverage with ABC Management Company is good...
There are 8 analysts who vote in New York, 4-5 in London (the number depends on the US-related projects). For the first half of 2010, only 2 analysts did not vote for us.  We are doing better than the competition.

...however our depth needs improvement.
Compared to the competitors, number of points we get from each analyst is low, according to the CIO i.e. we have fewer #1 rated analysts. As a benchmark, high single digit point is good, double-digit points are considered excellent (analysts and PM's allocate 100 points). We had 2 analysts who gave us double-digit points.

Overall ranking #3, but the upside to #1 is still big.
Top 3 gets roughly 40% of the commission market share. #1 broker gets in the high teens, while #3 gets 10%.  In absolute commissions, 8% difference is equal to around US $1m.  Biggest vote upside will come from the 2 analysts who did not vote for us.

Overall competitive landscape:
* Commission shares looks much like an S-curve. Top 3 gets roughly 40% of the commissions, while there is very little market share difference for #4-9.  1-2% difference between #4 and #9.  Top 10 gets close to 75%.  Broker universe has expanded as good analysts from big firms move to smaller houses or boutiques and ABC's analysts want access.  However, they are paid minimal amounts. Analysts usually vote for 10-15 brokers.

Overall updates on ABC Management Company:
* $7-8 B in assets under management
* Tougher 2Q, but July looking better overall.  Seeing stablilization of clients flow.
* Investment making process is a bottoms-up: each analyst talks to the portfolio manager when there are an actionable investment ideas and PM will make the final decisions on the stock.

ACTION POINTS:
* Introduction of credit analyst to John Smith
* Introduction of Thomas Jones to new technology analyst
* Establish solid relationship with Allan Edwards