HedgeCo.Net (New York) – Institutional money managers and hedge funds are paying more for individualized research products and services from Wall Street, according to a newsurvey. Instead of the “traditional” buy/sell/hold research reports from analysts, hedge fund investors are looking for a more personalised touch.

Cogent Consulting LLC announced that a recent review of its clients, which manage a total of more than $3 trillion in hedge fund assets, show  that firms are compensating broker dealers and other third party research providers for services that are more focused on particular investment strategies or portfolios.

The strategies that are gaining popularity with hedge fund investors include;

1. Meetings – Arranged by an analyst or institutional salesperson between a company’s management and a buyside investor.
2. Trade Ideas – Specific long or short stock recommendations created by institutional brokers and sent to buyside investors describing when to buy and sell and how much to invest.
3. Expert Networks – Connect investors with experts in industries of direct interest to them.
4. Analyst Telephone Calls and Emails – Where analysts provide further insight to company or industry developments or trends.
5. Custom Research – Buyside firms enlist a broker dealer or independent research provider to conduct specific research projects.
6. Investor Conferences – Traditional types of conferences where company managements make presentations and where investors can hold 1-on-1 meetings with a variety of companies, at one location.

Cogent’s ResearchTrak™ or HedgeTrak™ technology is used by many of the largest institutions and hedge funds in the US and UK to conduct quarterly “broker reviews.” The results of these reviews are employed to help decide on compensation paid to sellside firms and third parties for research. This compensation is typically in the form of “soft dollars” (trading commissions above those paid solely for execution), specifically designated “research commissions”, or commission sharing arrangements (CSAs). The survey found that on average, Cogent’s clients allocate more than 50% of their commissions for the payment of research products and special research-related services.

“The buyside appears to have redefined Wall Street research,” said Robin Hodgkins, President and CEO of Cogent. “Traditional reports, which feature estimates and commentary on company developments, are just the tip of the iceberg. Historically, we have seen money managers review just one general category for research. Today, clients are asking us to set up their votes so they can review a broader combination of research products and services, depending on the buyside firm’s investment approach.”

Cogent Consulting LLC is the developer of hedge fund commission management systems that enable money managers around the world to improve productivity and increase transparency for their clients and regulators. Founded in 1983, Cogent’s products include ResearchTrak™ and HedgeTrak™ broker review and voting systems, CommTrak™ for commission reporting and reconciliation, CSATrak™ for commission sharing and unbundled commission management, and BrokerTrak™, a broker-managed portal for relationship management.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net