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Alternative Market Briefing

Given the right tools, hedge funds can evaluate broker effectiveness

Wednesday, February 22, 2012

Beverly Chandler, Opalesque London: Client engagement manager at MIK Fund Solutions, Jay Rooney has posed the question 'how can hedge fund managers evaluate the effectiveness of their brokers?’

Rooney observes that traditional asset managers and hedge funds find themselves increasingly beset by demands to monitor and measure their activity. "These activities are fundamentally divorced from their core business – generating performance for clients. As the regulatory, operating and due diligence environments ask for more tracking, more monitoring, and more reporting, management firms are diverting human and capital resources to IT, infrastructure, and operations, in order to respond to and keep up with the external requirements. One of these is measuring the effectiveness of broker selection, using a complete suite of applications for broker tracking" he writes.

Rooney understands that all the requirements are burdensome but in terms of specifically broker tracking, a 'must do’, he asks how can the activity be leveraged to gain insight into the effectiveness of various brokers, in order to, as Rooney puts it: "thereby providing benefit to the firm beyond the requirement (e.g. the tracking of broker commissions, research events, and overall performance)?"

The ability to measure brokers can be an opportunity for managers, because they now can accurately monitor each broker’s contributions to the firm. "This encompasses both the performance of an individual broker as w......................

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