Frost Webinar: MiFID II Client Research Budgets: Industry Inflection Point/Managing the Risks

The delivery of initial MiFID II Client Research Budget proposals by managers planning to use client money for research will be a defining moment in the industry.

The MiFID II research funding model, and associated policies are the most critical client/competitive positioning decisions facing asset managers in a generation.

Senior management will be responsible for the outcomes. Do your key MiFID II teams understand the implications of:

  • Creation of Strategy Budgets and appropriate top-line budget amounts (based on “research intensity”).
  • Research Valuation Methodology: Can Marketing/Client Service clearly explain to clients how the research budget was derived?
  • Multi-Asset Class cross-subsidization risks.
  • Likely asset owner perspectives/responses.
  • Global Implications.

What Senior Management must do now to avoid sub-optimal outcomes for firm profitability and competitive positioning.


Watch a recording of the webcast

Related Document:


MiFID II Research Budgets: Active Management’s “Big Bet”


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FrostRB Research

European regulation requires asset managers to place a monetary value on unpriced research in the construction of monetary research budgets.

Aligning

Asset managers understand the benefits of aligning multi-asset class research budgets with their investment process/universe to deliver target returns and reduce cross-subsidization.

Frost RB Assets

Asset owners increasingly understand that the cost of research has a bearing on returns.

For more information, visit frostconsulting.co.uk

About

FrostRB is a Research Valuation/Budgeting platform that transcends “broker-vote” systems allowing asset managers to construct comprehensive research valuation/reporting frameworks specifically designed to meet MiFID II requirements.

FrostRB is a multi-asset class solution that harmonizes research budgets between equity and fixed income portfolios for multi-asset products.

Key benefits include:

  1. Ability to generate and aggregate monetary research budgets down to the fund level, eliminating fund cross-subsidization and meeting FCA/MiFID II requirements
  2. Specific selection and valuation of individual research products.
  3. Harmonization of research pricing (both priced and unpriced products) resulting in ~15% top-line research savings.
  4. Alignment of research budgets with investment strategies/universes, portfolio construction and expected returns.
  5. Streamlined workflow. One set of PM/Analyst research ratings can flow down through all of the investment products they influence to create customized fund/strategy level budgets.
  6. Sophisticated, customizable reporting by strategy, fund, research producer etc. to provide granularity of research payments for clients, regulators, internal constituencies.

The FrostRB framework can form the basis of the Research Valuation Policy (equivalent of Best Ex Policy) required by MiFID II. This policy must explain the manager’s research valuation methodology and the manner in which they fairly allocate research costs to different clients.

  • Alpha Generation

    Maximizing ROI on research spend lowers costs, adds to returns and aligns budgets and is an integral part of the investment process/offering.

  • Research Valuation

    Models to develop asset-manager specific valuation frameworks. FrostRB is a highly customisable research valuation software platform that allows asset managers to construct multi-asset class research budgets to meet European regulation.

  • Research Budgeting

    Designed to meet evolving regulatory requirements, systematic processes to adapt "Broker-Vote"/Research Commission Allocation outputs to customised dynamic Research Budgeting Frameworks. Design/Implementation/Payment

  • MiFID II Research Process Diagnostic

    "Audit" of the manager's current research procurement process to assess preparation and likely compliance with MiFID II requirements.

  • Risk Mitigation

    Regulatory/client reporting, CSA optimisation.

  • Managing Regulatory Change

    The origins of the current economic and regulatory model governing the institutional research business date back to the (US) Securities and Exchange Act of 1934. This venerable framework is on the cusp of transformational change. Frost helps asset managers, plan sponsors, banks and other market participants understand and capitalise on regulatory change.