Global Crossing Chiefs to Testify

SimCorp joins Omgeo STP Partner Program Omgeo, the DTCC Thomson virtual matching utility, has signed up Simco as one of the "partner" vendors it hopes will help it tie more fund managers, broker dealers and custodians into its solution than

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SimCorp joins Omgeo STP Partner Program
Omgeo, the DTCC-Thomson virtual matching utility, has signed up Simco as one of the “partner” vendors it hopes will help it tie more fund managers, broker-dealers and custodians into its solution than that of rivals GSTPA and SunGard. Copenhagen-listed Simcorp supplies an investment management system called TMS2000, whose customers can now interfaceseamlessly with the Central Trade Manager (Omgeo CTM) Omgeo has built to compete with the Transaction Flow Monitor (TFM) being tested by the GSTPA.Simcorp is the thirty-eighth vendor to join the Omgeo partnership scheme since it wasstarted in 1998. The idea is to make it easier and cheaper for clients of existing STP systems to hook up to Omgeo rather than GSTPA. Omgeo partners include suppliers of buy-side order management systems, portfolio management systems, sell-side trading systems, service bureaus for investment managers, service bureaus for broker/dealers, and service bureaus for custodians and middleware vendors around the globe. The vendors involved include Charles River Development, Checkfree, Eze Castle Software, Heliograph, Mercator, RoyalBlue, Princeton Financial, SmartStream and Thomson Financial Investment Management Group. A complete list can be found at”Now, with SimCorp joining the Omgeo STP Partners Program we can provide our and their clients with seamless integrated services across Continental Europe,” said Richard Hughes, Managing Director Europe/ Middle East and Africa, Omgeo. “This announcement will enable asset managers to achieve straight through processing right through from the front to the back office, thereby truly delivering the benefits of total automation. Omgeo is committed to ongoing strategic collaboration for the benefit of our clients through the STP Partner Program.”Kjell Nordgard, managing director of SimCorp Limited added, “We are committed to providing our clients with access to Omgeo Central Trade Manager, which will bring great efficiency and automation for our clients post trade. By joining the STP Partners Program we will be able to work with all vendors on STP processes and set strategic business objectives for the benefits of all of our clients.”Mercer Says Fund Managers Still Not Measuring Transaction Costs
If any further evidence was needed that transaction cost measurement is now the hottest subject in securities services, consultants William M. Mercer supplied it today. Only last week HSBC GIS unveiled its solution (“HSBC GIS Fuels Transaction Cost Measurement Craze”) and JP Morgan announced that Barclays Global Investors (BGI) had just bought its transaction cost measurement tool (“BGI Buys JP Morgan Transaction Cost Measurement Tool”)Unfortunately, Mercer found that not all fund managers share their enthusiasm. In a survey of 29 fund managers controlling over 500 billion in assets, Mercer found that only 13 used of third-party transaction measurement services such as Plexus, Elkins McSherry (owned by State Street) or GSCS. Just three said they had in-house systems for this purpose. “Our survey shows that many large fund managers are not measuring their ability to obtain the best prices for their clients when buying and selling shares,” says Piers Bertlin, European Partner at William M. Mercer. “The situation is not dissimilar to 15 years ago, when managers were unable to provide proper attribution of performance returns. Now it’s essential that they do so, no doubt the measurement of transaction costs will evolve in the same way. Presumably the number and quality of transaction measurement providers will grow, and costs will fall. The ability of managers to effect transactions at low cost is a critical skill for managers. Merely having good investment ideas is not sufficient.”One reason measuring transaction costs matters is the bear market. But the other, at least in the United Kingdom, is the Treasury-sponsored Myners report into institutional investment. The Code of Practice published after the report stipulates that “trustees … should have a full understanding of the transaction-related costs they incur, including commissions.” At the National Association of Pension Funds (NAPF) conference in Edinburgh last week Lindsay Tomlinson, chairman of fund management lobbying group the Investment Management Association (IMA), proposed adoption of a code by which fund managers would undertake to furnish plan sponsors with a complete analysis of costs, including fund management fees, stamp duty, custody fees and broker commissions. However, one crucial part of costs – market impact – remained outside the Tomlinson code. The draft Disclosure Code has been circulated amongst NAPF members for consultation. Mercer’s Bertlin describes the code as “a sensible first step” in ensuring that pension fund trustees are kept fully informed about costs by their fund managers. “We hope that there can be further development in also agreeing suitable measures for market impact and opportunity costs, so that these can be included in some form within the full disclosure,” he adds. “Such costs arise because it may be necessary to pay a premium when, for example, buying and selling large volumes of shares in a company.” However, Bertlin also cautions plan sponsors against pursuing transaction cost reduction as an end in itself. “It is important to see disclosures under this code in the context of total fund performance, net of fees,” he says. “An objective of simply minimising transaction costs is not necessarily aligned to the real goal of maximising added value. For example, there may well be good reasons to pay higher commission rates to get in and out of stocks more quickly, as part of an overall strategy.” No respondent to the Mercer survey supported an idea advanced in the Myners report for funds to pay a single, all-inclusive fee covering all services.Significantly, the Mercer survey also found that fund managers are gradually abandoning the use of soft commission payments. This practice, by which broker commissions can be directed to pay for goods and services used by the fund manager (including custody), was criticised by the Myners report as creating conflicts of interest. The Code of Best Practice for Pension Schemes, published by the UK government in the wake of the Myners report, made disapproval of softing official. Sixteen of the 29 managers in the Mercer survey did not use soft commissions at all. “Disclosure and a focus on transaction costs will put more pressure on managers who use soft commissions to justify their continuing use of this practice,” says Bertlin.One of the least surprising findings of the Mercer survey was that commission rates agreed by fund managers with brokers varied considerably. According to the survey, the norm is close to 0.15 percent for UK trades, but it also found commissions ranged from 0 per cent (for “net” trades) to 0.3 percent (for difficult trades). According to Mercer, this suggests that the average commission rate for UK equity business is slightly lower than that in most other countries (rates in Europe and the Far East generally exceed 0.2 per cent). Stamp duty, however, is a major cost element, making the UK a very expensive market in which to make transactions. The British government is now coming under pressure – from the liquidity-seeking London Stock Exchange, among others – to redeem its longstanding promise to axe the tax.Another way of cutting costs, of course, is to cut brokers out of the equation altogether. And Mercer found fund managers are increasingly willing to use crossing networks, which enable them to match buy and sell orders without the need to pay a dealing spread. 20 of the 29 fund managers surveyed by mercer now use such networks, enabling them to reduce their overall transaction costs. “This is an encouraging development,” says Bertlin. “Ten years ago these networks barely existed.”
CLICK HEREfor a full reportPutnam Investments Reorganises Its Fund Offerings
Putnam Investments has trimmed its retail fund offerings by 11 in an effort to concentrate its investment resources. The proposed changes – 10 funds will be merged into others, and 1 will be liquidated – are subject to approval by Putnam’s fund trustees and, in most cases, shareholders. 3-Plansponsor.comVanguard To Add Two New Funds
The Vanguard Group has announced plans to adopt two actively managed stock funds into its current equity fund lineup.The two funds are the Provident Investment Counsel Mid Cap Fund A, a $31 million mid-cap domestic growth fund managed by Provident Investment Counsel (PIC) and the Schroder International Smaller Companies Fund a $26 million international stock fund managed by Schroeder Investment Management North America Inc. Vanguard Mid-Cap Growth Fund will seek to provide long-term capital appreciation by investing at least 80% of its assets in mid-cap stocks. The Vanguard International Explorer Fund will seek long-term capital appreciation by investing primarily in small-cap international stocks.If the Securities and Exchange Commission approves Vanguard’s plan to take over the funds, they will be renamed the Vanguard Mid-Cap Growth Fund and the Vanguard International Explorer Fund. The new funds will bring Vanguard’s roster of actively managed stock offerings to 23.In conjunction with Vanguard’s filing, shareholders of the reorganized funds will be mailed proxy statements detailing the terms of the reorganizations in May. Additionally shareholder meetings are scheduled for June. If approved, Vanguard expects the tax-free reorganizations to be completed in July. PIC and Schroeder will remain as investment advisers for the new funds.3Canadian Mutual Fund Sales On Rise
Canadian mutual fund sales jumped 67% in February to $2.7 billion, although year-to-date sales were 5.8% lower than year-ago levels, according to the Investment Funds Institute of Canada (IFIC). Investors were shifting from money market to equity investments, according to the report.3-Plansponsor.comGlobal Crossing Chiefs to Testify
Global Crossing Ltd chief executive John Legere and CFO Dan Cohrs will testify before the House of Representatives Committee on Financial Service’s Subcommittee on Oversight and Investigations on Thursday. The hearing is scheduled to focus on the effects of the firm’s bankruptcy on investors, financial markets, and