commissions

Trend: More roll-ups of advisory firms?

Thu, 13 Mar 2008 07:59:57 -0400

Registered investment advisers have a pretty compelling pitch when it comes to graying clients. They aren't commission-based guys. They're thinking less about trades and more about your portfolio in its entirety. Of course, some of them take something like 200 basis points, which some would find even worse than cadging a few commissions here and there. In any case, there is demand for RIA service and several in the private equity industry are bent on creating nationwide firms by rolling up boutique advisory firms, notes Investment Dealers' Digest. While this is nothing new--recall the success of National Financial Partners--the trend seems to be gathering steam.

For more:
- here's the Investment Dealers' Digest article

Hedge funds turn away from sell-side research

Fri, 07 Mar 2008 06:59:57 -0500

Financial News Online reports that the buy side, in general, is buying much less research these days. The trend likely will continue as hedge funds work to develop their own research. This is bad news for the sell side and for independent shops; hedge funds account for the majority of their equity commissions. Top hedge funds are continuing to invest in their internal research capabilities. At the same time, they are bent on reducing costs via cheaper execution venues. All that seems to be squeezing research a bit. Sell-side research will never wither, but the concerns about the sell-side business model persist.

For more:
- here's the Financial News Online article

Related Articles:
Sellside analysts redux? Article
Buy side monitoring effectiveness of sell-side ideas. Article
Sell-side research abuse charges coming. Article

Merrill and Wachovia's Tishman gambit

Wed, 06 Jun 2007 20:01:34 -0400

Wachovia and Merrill Lynch scored a big win when they won the advisory mandate on Tishman Speyer's $5.4 billion acquisition of Stuyvesant Town/Peter Cooper Village from Metropolitan Life Insurance. But the win came at a price. They pledged $1.5 billion in bridge equity to seal the deal. Arranging for bridge equity, which basically finds buyers of equity to replace a bridge loan after the deal is done, is lucrative work; commissions are roughly 4 percent. But what if your buyers are scarce afterwords? Some people are talking about the fact that not all of the equity for this deal has been sold. Investors may have balked because the deal resulted in a lawsuit from the buildings' tenants. It may be that Merrill and Wachovia have to hang on to the equity longer than they expected. That would not be a disaster per se.

For more:
- here's an article from Investment Dealers' Digest (For FierceFinance readers)

Hedge funds soar in Asia, bubble building?

Wed, 21 Feb 2007 19:01:38 -0500

This is pretty amazing: In just two years, the share of trading volume in Asia accounted for by hedge funds has grown from 5 percent to almost 25 percent. Commissions accounted for by hedge funds are also at about 25 percent. The rise of hedge funds in Asia may usher in a new era of trading. For one thing, these funds prefer electronic trading, and many think we'll see greater adoption region-wide. This is an opportunity for U.S. exchanges and their Asian partners, the TSE in the case of the NYSE. These funds represent a lot of liquidity, and it remains to be seen what will happen if the markets stagger, which is hardly inconceivable. This may be "hot" and it might quickly find its way to another part of the globe--we'll see. We saw this back in the late 1990s currency crisis.

For more:
- here's a brief from Financial News online
- more hedge fund news

What's up at Jefferies?

Wed, 17 Jan 2007 19:01:37 -0500

Jefferies was on fire just a year ago. It's shares have been under a bit of pressure as of late, as the market seems to be opting for the big names in the bulge bracket. Of course, a good earnings report today could turn all that around for the firm that many see as a mid-market bellwether. One issue may be commissions. The bank has done a good job diversifying its revenue streams. The sales and trading division now accounts for roughly half of Jefferies' revenues. That's much less than it used to be--in 2000, it contributed 78 percent of revenues--but it maybe a bit too much in a fee-based era. All in all, you have to think that the incredible performance of the big names has made all others look a bit average.

For more:
- here's an article from Investment Dealers' Digest (For FierceFinance readers)

Hedge fund leases at issue

Mon, 01 Jan 2007 19:01:37 -0500

One proactive approach to building a prime brokerage business is to run a hedge fund incubation program. One example would be UBS's "hedge fund hotel," where start up hedge funds lease space from UBS in hopes of hitting it big. At least one regulator, William Galvin of Massachusetts, is a bit concerned with such real estate arrangements. He has subpoenaed several banks, including UBS, about how much lease is actually being charged. If rates are way below market rates, it would be frowned upon by many regulators. At the same time, you have to wonder if lower leases translate to higher commissions and fees. If so, that really ought to be disclosed. So it boils down to a disclosure issue.

For more:
- here's a New York Times article

Miniprime industry suffers some growth spurts

Wed, 08 Nov 2006 19:01:37 -0500

The rapid ascent of the hedge fund industry in recent years has led to a large jump in the number of so-called miniprimes. These are prime brokers that cater to smaller hedge funds. But as the entire hedge fund industry faces questions about growth, the miniprime industry is already showing signs of strain. The fact is that commissions are only going lower, and hedge funds, even the small ones, want the dazzling services associated with large prime brokers. They just want it cheaper. Add to that the trend by hedge funds toward supporting only one or two primes and you've got a recipe for lots of consolidation. Commission-only shops had better start searching for some proprietary services to offer, or they won't be around long. There is probably room for innovation, but it will take a really creative firm to come up with something that can support the business.

For more:
- Here's an article from Investment Dealers' Digest. (For FierceFinance readers)

ETFs plus free trades equal big boon

Tue, 24 Oct 2006 20:01:35 -0400

Exchange traded funds have been a huge success story. If more brokerages offer free online trades, as some expect, they will become even more successful. If you can fathom that. One of the big drawbacks of ETFs was that investors had to average only at a hefty cost. This often made them prohibitively expensive compared to index funds, outweighing the many other advantages. Take away the commission and customers have no reason not to buy. Over the long haul, ETFs would truly begin to rival funds. Now, the big if remains with discount brokerages. Will they move en masse to get rid of commissions? That remains to be seen.

For more on this:
- Here's an article from TheStreet.com
Also: New private equity ETF coming. Brief

Bank of America might spark a commission war

Thu, 12 Oct 2006 20:01:34 -0400

Bank of America's move to offer free equity trades to many customers stoked talk that a commission war might be in the offing. Unless Bank of America really starts taking customers, that might not happen. Look at it this way: Have you ever tried to switch brokerage accounts. It's not necessarily a snap. Most people get comfortable with their service. Charles Schwab says he will not change his firm's commissions, noting that customers care about other features these days. Indeed, the online industry's efforts to develop other revenue sources has resulted in wider awareness by customers of non-commission features. So a bunch of copycats may not be lurking. Still, the online guys could use even more higher margin services.

For more on this:
- Here's a Business Week article

Bank of America move may hit online brokerages

Wed, 11 Oct 2006 20:01:35 -0400

Bank of America's announcement that it would offer 30 trades a month free to accounts with $25,000, raises the stakes for the pure online brokers. They are all under pressure already to diversify their revenue sources away from trades. One likely outcome a some kind of price war. The likes of TD Ameritrade and E*trade may be forced to lower commissions still more. The responses from other juggernauts, like Citigroup, JP Morgan Chase and Wachovia, will potentially be more interesting. If they jump on the bandwagon, the discount guys will have tougher road. To be sure, free trades have been tried before. It's in many ways a marketer's dream, but it did not take off before and it's unclear if customers will respond any differently now.

For more on Bank of America's move:
- Here's an article from TheStreet.com