Financial News Online US- Fund managers are being forced to pay their brokers more in commissions to compete with hedge funds for the sellside’s best ideas and service.
The findings are one of the unintended consequences of unbundling of commissions in the UK. Fund managers used to pay a set commission for execution and research, regardless of whether they used them, but they now have to account to their investors how much they spend on each service.
Before the rise of big hedge funds, institutional asset managers had the ear of top analysts and received the first call on a new stock issue. In some markets, including the UK, they had such a stranglehold that commissions were driven to unsustainable lows.
However, the growth of hedge funds and their rising importance to sellside brokers means they are often at the head of the queue for best ideas. That means sellside brokers have become more careful about how they allocate their time between clients and what level of commission they receive in return.
