USS, PGGM group outline broker evaluation
EUROPE - A group of buy-side institutions that includes two of Europe's largest pension schemes, USS and PGGM, has outlined the criteria they will use to evaluate the performance of brokers.
Late last month the group, called the Enhanced Analytics Initiative, was set up to change the way the brokerage community analyses extra-financial issues and intangibles.
Now, following a meeting with 28 brokers in London this week, it has outlined the criteria members will use to evaluate the performance of brokers who participating in the initiative.
Among the points raised are the comprehensiveness of the range of extra-financial issues analysed and brokers' ability to make company-specific assessments which permit comparison between companies.
Also at issue are whether there is integration of the results of both financial and extra-financial analysis - and whether there is a match between research and investable "universes".
The investor group - which includes BNP Paribas Asset Management, PGGM, Allianz group members as well as the Universities Superannuation Scheme - collectively run around 364 billion euros in assets.
They anticipate allocating around four to five million euros during to 2005 to brokers "who excel at integrating extra-financial analysis into their mainstream research process".
Allocations for 2005 will be informed by an evaluation being undertaken by an independent consultant, Ivo Knoepfel of onValues Ltd.
"We have seen some very interesting examples of brokers doing this sort of work but it's clear that they lack a case for doing it systematically," said Peter Moon, chief investment officer of USS. "They need a transparent commitment, something they could hold us accountable to. And above all they need us to break the chicken and egg dilemma that currently exists, so they can start gearing up."