USS, PGGM in broker research initiative
EUROPE - Two of Europe's largest pension funds, the UK's USS and the Netherlands' PGGM are among the founding members of an initiative to challenge sell-side research.
The so-called Enhanced Analytics Initiative seeks to change the way the brokerage community analyses extra-financial issues and intangibles.
"With this project we are laying down a challenge to brokers everywhere," said Roderick Munsters, chief investment officer of Dutch healthcare scheme PGGM.
"It's a difficult task to convince the investment community that intangibles really matter: by offering the broker community a challenging perspective, we believe that we can speed up and streamline this process."
The initiative says it seeks "to address one of the obstacles to investors taking a longer-term and more rounded assessment of corporate performance - namely the current focus of much sell-side research".
The founding members are PGGM and UK educational scheme the Universities Superannuation Scheme along with BNP Paribas Asset Management and Allianz's RCM, Deutscher Investment Trust and dresdnerbank investment management.
They have agreed to allocate five percent of their broker commissions on the basis of how well brokers integrate analysis of extra-financial issues and intangibles.
Such issues typically include corporate governance, human capital management, value creation or destruction during mergers and acquisitions, or global environmental challenges such as climate change.
The group will host a briefing session for brokers on November 2 in London at which the project will be explained in full by the CIOs of the four founding members.
"We decided to help launch this project because both we and our brokers know the current approach is producing a lot of research which adds little value," said USS CIO Peter Moon.
"We feel that a catalyst is required to encourage active participation by broking houses therefore allocating five percent of the research budget seems a pragmatic incentive to enable brokers to produce more rounded, more useful research."
The initiative builds on the experience of other projects such as the Institutional Investors Group on Climate Change (IIGCC) and UNEP-FI Asset Management Working Group where brokers have been asked to deliver innovative research.