Fund managers demand operational improvements from brokers

Fund managers demand operational improvements from brokers

Two thirds of asset management companies have suspended business with brokers because of poor operational performance, reports a recent survey carried out by Z/Yen, the City-based consultancy firm.

The survey of 31 UK asset management companies found that 68% reported instances where they have suspended trading with brokers due to poor operational performance. Indeed, 70% of the sample formally rank their brokers based on operations performance and regularly distribute this information to fund managers and traders.

The report's findings run contrary to the popular perception of buy-side firms as IT refuseniks. Seventy-three per cent of the survey are currently implementing new systems aimed at improving straight through processing (STP), with 60% working on FIX messaging and 46% evaluating central trade matching.

At the same time, asset managers are raising the bar for sell-side brokers, with a clear majority (90%) demanding electronic trade confirmation for all securities in all markets. The same number also insist on a centralised operations CRM function at each broker, staffed by individuals "who can resolve issues rather than acting as a post-box".

However, only three per cent placed high importance on availability of brokers' systems via the Internet, which is considered disruptive to workflow.

Jeremy Smith, a director at Z/Yen, says: "The Asset managers are acutely aware of operational service levels currently provided by the investment banks. We believe that as their new systems are implemented, any remaining tolerance of poor performance will disappear."

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