The craze for measuring transaction costs shows no sign of abating. Deutsche Asset Management announced the introduction of BrokerMerit, a proprietary web-based system designed to rate, rank and review the brokers that DeAM uses around the world.
DeAM, which pays up to $1.0bn in commission on a global basis per year on behalf of clients, is committed to optimising its broker relationships and adding value to clients by creating greater transparency and accountability in commissions. BrokerMerit will facilitate both and ultimately allow DeAM to save money for its clients.
In the past DeAM has used up to 550 different brokers to provide it with services covering equities, fixed income and foreign exchange. BrokerMerit will aim to dramatically reduce this list to only the best performers.
The system is up and running 365 days a year and accessible from all DeAM offices globally.
It works by aggregating the views of all those at DeAM ranging from fund managers to settlement officers who receive a service from the sell-side. Once a quarter a snapshot is taken of all these views, both qualitative and quantitative.
The output provides a clear report on what services from which brokers are deemed valuable and important. Rankings are then set for the brokers. The system enables DeAM to identify and pay for ‘value added’ services and to eliminate both the receipt and payment for superfluous services.
Although the system is owned by DeAM, and built /maintained by a company called Co-Kinetic, the onus for keeping sell-side information current is on the brokerage community. To date brokers, who have had access to the system since August, have already registered approximately 50,000 contact names.
Gunner Burkhart, DeAM’s Global Head of Trading and Broker Relationship Management, commented:
“Our clients expect that we use commission judiciously to maximise returns and we wish to make this process far more transparent. BrokerMerit is a unique tool and one that will go a long way in identifying value, thereby ensuring we only get and pay for what is useful. By doing this we also hope that we can reward some of the smaller specialist brokers we use more equitably.
“We embarked upon the construction of BrokerMerit almost 12 months ago. The Myners Report subsequently came out and among other things questioned the way commissions are used across the UK fund management industry. We believe BrokerMerit more than answers those questions.”