A Quantitative Approach for Evaluating the Impact of Side-by-Side Management

Case Study

In this case study we explore how traditional transaction cost analysis (TCA) models using alternative benchmarks can accurately identify trades that appear to benefit one account or fund over another. We’ll also demonstrate how Sentry – our post-trade compliance solution – enables global investment management firms to establish a systematic, quantifiable, and repeatable process for evaluating side-by-side management conflicts.

Regulatory Background

Advisers are required to adopt policies and procedures designed to ensure that all funds are treated fairly and equitably over time, regardless of investment strategy, legal or fee structure. This is enforced in The United States under Rule 206(4)-7 of the Advisers Act and in the United Kingdom under Principle 3 and Principle 8 of the FCA’s Principles of Businesses, which require an investment adviser to manage conflicts of interest fairly between itself and its customers, and between customers and other clients.

Results

Using Sentry, the Adviser has conducted account impact analysis for four consecutive years. Their monthly review validates that all accounts are trading on average within 20 basis points of their peer account, regardless of strategy or legal structure. Using data filters, the Adviser is also able to more closely monitor affiliated and proprietary accounts to ensure that no preferential treatment of these accounts exists. Each time trade impacts are identified that contribute substantially to account impact ratios, the Adviser validates that orders were handled in accordance with aggregation and sequencing policies and that no conflicts of interest influenced the execution or allocation decision.

Fill in & submit the form below to download this Case Study

Thank you!

Your download will appear below momentarily.

Download Now.

Latest Content

Breakdown of OCIE’s COVID-19 Compliance Risks Alert

The SEC’s “Office of Compliance Inspections and Examinations (“OCIE”) issued an Alert today regarding “Select COVID-19 Compliance Risks for Investment Advisers and Broker-Dealers.” OCIE shared observations regarding six broad categories: protection of investors’ assets; supervision of personnel; practices relating to fees, expenses, and financial transactions; investment fraud; business continuity; and the protection of investor and … Continued

Are Investment Managers Going to Have More KIDs?

Let us be clear…. we’re actually talking about the potential increase in production of point-of-investment disclosure documents for investment managers. The complications and stress of Brexit just got a whole lot more real for many UK- and EU-based investment management companies that are subject to rules requiring production of UCITS KIID (Key-Investor-Information-Document) and PRIIPs KID … Continued

Do You Feel Confident Your Password Hasn’t Been Hacked?

As a cybersecurity consultant, I am often asked if some of the threats we industry practitioners talk about are overstated. Hyped up fear as a sales tactic. The simple answer is no. The fear is not overstated, and the risks all too real – which helps to explain why cyber remains a top priority for … Continued