EUROPE - A group of leading European institutions, which includes pension funds USS and PGGM, have commended 10 brokerage firms for the way they analyse non-financial material.
The members of the Enhanced Analytics Initiative - who command total assets of €376bn - encourage brokerage researchers to analyse “extra-financial” considerations. They will allocate a minimum of 5% of broker commissions to those who do this best.
“The ad hoc approach taken so far by many brokers has resulted in a rather patchy coverage of different extra-financial issues, sectors and companies,” said Peter Moon, chief investment officer at USS, the Universities Superannuation Scheme.
“EAI is convinced that, by providing the right incentives, it can support brokers in taking a more systematic approach to this type of research.”
Roderick Munsters, CIO of Dutch health care pension scheme PGGM, said: “EAI is confident that the quality and coverage of extra-financial issues will improve considerably in the near future but we know this depends on additional clients sending a clear signal to brokers about what they want.
“The most effective way for funds and their managers to do this is to join EAI.”
The group - set up in October 2004 - praised Deutsche Bank, DrKW, Goldman Sachs, HSBC, Morgan Stanley, UBS and WestLB. It gave “runner-up” citations to ABN Amro, Citigroup and CM-CIC. The brokers were selected from an initial 21 and were evaluated by consulting firm onValues Ltd.
It is anticipated that the total amount set aside for the project will be around €4-5 million in 2005.
“The response by brokers has been very encouraging. Of the 31 brokers contacted, 68% indicated they wanted to take part,” said onValues’ managing director Ivo Knoepfel.
“Several brokerage institutions are currently shifting gear from a rather opportunistic approach to a more professional one based on stronger institutional commitment.”
The EAI added that it has signed up the Netherlands’ SNS Reaal Group as a member.