Researchers still hold the power
Fund managers have confirmed that the major research houses are still capable of significantly influencing their businesses, with 50 per cent stating that researchers have a good ability to reflect a fund manager’s investment practices, and a further 44 per cent believing they have a good ability to influence a fund manager’s cash flows.
The findings come as a result of Money Management ’s Rating the Raters survey for 2006.
The annual examination of the research houses asked participants to register their responses to a variety of topics such as methodologies used, transparency of processes and personnel hired. Fund managers were also asked to give an assessment of each research firm’s overall capabilities.
This year a total of 43 investment houses, with funds under management of over $537 billion and offering products across all major asset classes, took part in the survey.
But the acknowledgment of the raters’ influence was tinged with continued concern surrounding the potential for conflicts of interest arising from the offering of additional services by the research houses.
Among these peripheral services, fund managers saw the offering of investment management products as being the biggest threat to a researcher’s impartiality, with 84 per cent subscribing to this view.
Ownership of a research house by a fund manager or financial institution also caused angst for respondents, with 81 per cent adamant this type of structure created a conflict of interest.
In terms of overall ability, Lonsec finished ahead of its major competitors, with 50 per cent of fund managers giving it a good rating in this area. Van Eyk and Morningstar were considered the next best in this capacity, with 38 per cent of participants giving each rater a good assessment.
Lonsec was also the most popular choice among fund managers for being able to keep its ratings free from conflicts of interest, with 47 per cent of respondents regarding the researcher as good in this aspect of its operations.
n For the full results of the survey see this week’s Money Management.
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