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Unbundling, which is compulsory in the United Kingdom, may show no sign of being imposed by AsiaÆs financial regulatory authorities, but UBS believes it will become accepted by institutions as a key tenet of best execution policy.
The system means investment managers are required to clearly delineate charges within client bills by expressing investment research and execution charges separately. According to UBS, this will result in greater disclosure on the supply side and give institutions greater control over what firms they use to provide brokerage services.
Unbundled services can be processed through Commission Sharing Agreements, whereby commission is paid to a single broker and paid out to the third-party provider.
At a UBS seminar yesterday, a snap survey of attendees from the Asian institutional asset management industry saw more than 50% say they would only introduce unbundling if required to do so by their financial regulator.
Despite this, UBS executives believe unbundling is likely to be adopted by asset managers across the region, and will increase the quality and transparency of advice.
Mark Steinert, UBS global head of equity research, says, ôWe have spoken to 50 institutional clients and on average they pay 65% of commission to research.ö Because unbundling does add costs and require extra compliance measures for brokers, only a handful will be able to provide both research and execution. Investment analysts, however, should prosper.
Steinert explains: ôOnly between three to five companies are able to provide a full service. But large fund managers rely more on broker research than people think and it will create the need for more analysts on the sell side.ö
In expectations of its unbundled service offering drumming up more business, UBS is also expanding its equity research to three new countries û Pakistan, Vietnam and Sri Lanka û and beefing up existing desks in China and India.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.