New regulations in Europe under the Markets in Financial Directive II (MiFID II) have banned the use of soft dollars by investment managers. This has created a “ripple effect” for those who utilize global asset managers.
As a result, asset owners face new fiduciary risks and responsibilities; and need to make prudent, informed decisions regarding research budget requests received from their managers, and also ensure that their fund is not being used to subsidize the research costs of the managers’ other clientele.
As its name implies, the Soft Dollar & Research Budget Audit is designed to help asset owners review the soft dollar/research policies and practices of their managers and provide tools necessary for assessing their reasonableness.
Soft Dollar & Research Budget Audit also assists asset owners in encouraging their managers’ prompt compliance with these regulations, tracking each manager’s progress. Furthermore, it helps ensure a fund is not disadvantaged relative to the managers’ other clients.
For Asset Owners, trading costs can average over -48 bp each way (-96 bp round trip)!
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