I was alerted to two articles at http://www.finalternatives.com regarding manager selection. The first article contained the results from SEI, "a leading global provider of asset management, investment processing and investment operations solutions for institutional and personal wealth management", (Source: http://www.seic.com/enUS/about.htm) and Greenwich Associates. Of 111 investors asked, 54% planned to increase their asset allocation into hedge funds. The top two criteria were investment process transparency and risk management abilities of the firm. The article can be accessed here.
The second article is an interview with Hal Daughdrill, Chairman of Diversified Trust Company. This is repetitive but the most important factors for selecting a manager are people, process (for stock selection and portfolio management) and structure (how much the manager has invested in the fund, liquidity, fund lockup provisions, etc.). He also mentions that not being located in New York can be an advantage. The article can be found here.
Showing posts with label greenwich survey. Show all posts
Showing posts with label greenwich survey. Show all posts
Tuesday, January 18, 2011
Sunday, June 20, 2010
A Quantitative Way to Rate the Sell Side - Part 1
As a companion to Greenwich Associates' qualitative survey, investment banks also participate in a quantitative survey created by McLagan Partners (www.mclagan.com) from Stamford. Connecticut. Unlike the Greenwich Associates survey, trading commission numbers are self-reported by the broker/dealer community. The assumption for this survey is that each firm will report honestly. It is in their self-interest to have accurate information even if the news is unpleasant.
The McLagan reports are published every quarter and sell side firms value the regular and somewhat immediate feedback. Greenwich and Institutional Investor ratings occur once a year. Because of the quantitative nature of McLagan, they are able to cast a wider universe of buy side firms. Instead of sending questionnaires to thousands of buy side firms, they are sent numbers by the sell side - a more limited set. One thing in common between Greenwich and McLagan is that their results are to be kept private. They are performance measurement services that allow broker/dealers to improve their client service.
The process begins at the end of each quarter. A list of current buy side firms are sent to the sell side. This list includes any changes such as re-organizations, mergers or spin-offs since the prior quarter. McLagan asks if there are any new firms that should be added to increase their coverage universe.
The firm respects the privacy wishes of buy side firms by allowing them to opt out of the survey. This request is usually in response to the following comment by the broker/dealer. "Last quarter, we were ranked 3rd in your broker survey and we know that there were 5 firms with more commissions than us. How can we get this discrepancy resolved in the next quarter?" To avoid this conversation, the buy side will ask McLagan to suppress their records in the survey. If too many firms are suppressed, the survey is devalued.
Each sell side firm submits their quarterly commission numbers about 3-4 weeks after the end of the quarter. McLagan compiles the numbers and publishes the results 1 month later. The reports are run broken down by region (Americas, Europe and Asia) and by product. Products are split into country and type of security. Each sell side firm is ranked in absolute numbers and given a rank out of the total number of broker/dealers that trade with the buy side firm. Depending on where the firm is ranked, commission numbers are given at different benchmarks such as number 15, 10, 5 and average of the top 3.
These are the basics of the survey. I will give more details in the next post.
The McLagan reports are published every quarter and sell side firms value the regular and somewhat immediate feedback. Greenwich and Institutional Investor ratings occur once a year. Because of the quantitative nature of McLagan, they are able to cast a wider universe of buy side firms. Instead of sending questionnaires to thousands of buy side firms, they are sent numbers by the sell side - a more limited set. One thing in common between Greenwich and McLagan is that their results are to be kept private. They are performance measurement services that allow broker/dealers to improve their client service.
The process begins at the end of each quarter. A list of current buy side firms are sent to the sell side. This list includes any changes such as re-organizations, mergers or spin-offs since the prior quarter. McLagan asks if there are any new firms that should be added to increase their coverage universe.
The firm respects the privacy wishes of buy side firms by allowing them to opt out of the survey. This request is usually in response to the following comment by the broker/dealer. "Last quarter, we were ranked 3rd in your broker survey and we know that there were 5 firms with more commissions than us. How can we get this discrepancy resolved in the next quarter?" To avoid this conversation, the buy side will ask McLagan to suppress their records in the survey. If too many firms are suppressed, the survey is devalued.
Each sell side firm submits their quarterly commission numbers about 3-4 weeks after the end of the quarter. McLagan compiles the numbers and publishes the results 1 month later. The reports are run broken down by region (Americas, Europe and Asia) and by product. Products are split into country and type of security. Each sell side firm is ranked in absolute numbers and given a rank out of the total number of broker/dealers that trade with the buy side firm. Depending on where the firm is ranked, commission numbers are given at different benchmarks such as number 15, 10, 5 and average of the top 3.
These are the basics of the survey. I will give more details in the next post.
Tuesday, June 15, 2010
A Qualitative Survey of Sell Side Brokers
Greenwich Associates is a third party research company that advises sell side firms on how they are currently serving their clients and how they can improve. A review of the www.greenwich.com website lists a wider mission statement that includes both sell and buy side firms. In this article, we will concentrate on the sell side survey.
The survey starts when Greenwich sends out a list of the buy side firms that will contribute. The usual suspects are on the list: Fidelity, Capital Group, Wellington Management, etc. For these firms, the sell side nominates the contact who will receive the survey. Also, the sell side is encouraged to add new firms to the list. This helps Greenwich give the sell side more robust results and add new customers. The contact for any given buy side firm is by majority vote. So if 6 firms have John Smith as the contact and 5 firms have Pete Jones, then John Smith will be listed as the official contact. This is called "ballot stuffing". Obviously, if John Smith receives the survey, then the 5 firms that speak primarily with Pete Jones will be at a disadvantage.
I have not seen the questionaire but it is qualitative in nature. These answers are compiled into a rating score on a scale of 1 to 1000. A total result is given for the entire universe of accounts. Then ratings are given by each role within equities: research, research sales and salestrading. They can be further sliced and diced by account coverage. For any result to be statistically significant, a minimum of 5 firms have to fill out the survey. Greenwich also provides account profiles that contain feedback from the buy side firms. The contents are confidential to sales management. The salespeople and salestraders covering the account are not to be informed. However, I always wondered about it. If the buy side tells sales management of the investment banks on how to improve client service, how would management broach the subject to their staff without giving away the source? Especially after the Greenwich survey has been published.
The survey starts when Greenwich sends out a list of the buy side firms that will contribute. The usual suspects are on the list: Fidelity, Capital Group, Wellington Management, etc. For these firms, the sell side nominates the contact who will receive the survey. Also, the sell side is encouraged to add new firms to the list. This helps Greenwich give the sell side more robust results and add new customers. The contact for any given buy side firm is by majority vote. So if 6 firms have John Smith as the contact and 5 firms have Pete Jones, then John Smith will be listed as the official contact. This is called "ballot stuffing". Obviously, if John Smith receives the survey, then the 5 firms that speak primarily with Pete Jones will be at a disadvantage.
I have not seen the questionaire but it is qualitative in nature. These answers are compiled into a rating score on a scale of 1 to 1000. A total result is given for the entire universe of accounts. Then ratings are given by each role within equities: research, research sales and salestrading. They can be further sliced and diced by account coverage. For any result to be statistically significant, a minimum of 5 firms have to fill out the survey. Greenwich also provides account profiles that contain feedback from the buy side firms. The contents are confidential to sales management. The salespeople and salestraders covering the account are not to be informed. However, I always wondered about it. If the buy side tells sales management of the investment banks on how to improve client service, how would management broach the subject to their staff without giving away the source? Especially after the Greenwich survey has been published.
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