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Beneficial owners demand independent benchmarking

02 February 2017

Asset owners are increasing seeking third-party verification of their programme’s performance – but are not necessarily so keen on paying for it

One of the key emerging demands from beneficial owners is the ability to assess their lending programme’s performance using tools independent of their agent lender.

Bob Hollinger, a partner of consultants Barrington Partners, said: "One of the key things our clients are asking for is benchmarking – how they did compared to the rest of the market."

Tim D’Arcy, SVP of data provider ASTEC Analytics, told the delegates of the IMN US Beneficial Owners Conference: "We are definitely seeing huge demand for benchmarking. It’s a key piece – complying with regulatory demands and answering to boards of directors.

"We see the demand from beneficial owners, to receive the report, but we are also seeing demand for the invoice to be sent to the agent."

An alternative for the largest programmes is to create multiple pools with different providers. "One client maintains two separate funds that are mirror images of each other, so they can do peer-to-peer comparison," added Hollinger.

Anthony Toscano, managing director, head of US trading, Deutsche Bank, said: "There is no better way of benchmarking than having multiple providers – but everyone is resource challenged. We spend a lot of time explaining it to clients, in a way that they can explain to their constituents."

In addition to benchmarking Hollinger noted that beneficial owners were also concerned with soft factors beyond purely financial considerations. "Indemnification varies significantly and is a key differentiator affecting the fee split. Another differentiator is the culture and the people. The numbers all look roughly the same – but which are we most comfortable with?"

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