The Boston Company Asset Management’s $37 billion under management is about equal to Apple Inc.’s profit for its 2013 fiscal year, so the firm is hardly a peanut. But in the era of giant institutional investors, the assets represent a small fraction of what the BlackRocks, Vanguards and State Streets of the world have entrusted to them.
The Boston Company can’t match their sheer size and resource base, so David Brooks, head of global equity trading, leverages the right relationships to ensure his team’s executions are as efficient as possible.
“We stay progressive is by collaborating very actively with our peers and partnering with innovative vendors,” Brooks told Markets Media. “We take more of a buy–over–build mindset, and we’ll work with both established and newer commercial vendors that can deliver solutions for our needs. Given our size, that approach has really helped us stay ahead of some of the changes that are shaping the industry.”
Market professionals have said The Boston Company is as forward-looking as its larger rivals, and its trading professionals are just as smart. The Boston Company is the 2016 Markets Choice Award winner for Best Mid-Sized Buy Side Equity Trading Desk.
“We want to create outcomes that are both fair and transparent across our client universe,” Brooks said. “We believe we owe (clients) a look under the hood, so we try to make the process and the results as transparent as possible. Associated with that priority is keeping the processes as unconflicted as possible, or at a minimum mitigating the conflicts of interest that are inherent in the investment process and trading.”
The Boston Company is a unit of The Bank of New York Mellon, but operates within a boutique model as an independent entity. Brooks, who joined the firm in 1998 and assumed the role of trading head in December 2000, highlighted three recent initiatives where his 15-person team has raised the bar on the trading operation.
One initiative is around Markets in Financial Instruments Directive II, the developing European regulation that is expected to prohibit investment managers from using client commissions to pay for research. “We rebuilt our research budgeting model last year to separate the two and move to a model that’s bottoms-up and role-based, instead of top-down,” Brooks said. “We did this with the client in mind to be able to fully justify the spend as stewards of their commission dollars.”
Another push has been toward ensuring that ‘wrap and model’ clients, for whom managers provide model investment portfolios and timely trade instructions to a third party, are treated the same as clients in fully discretionary accounts, where managers trade directly on behalf of the client.
“Because of the trading constraints associated with these (wrap and model) types of mandates, we’ve worked with both sponsors and outside counsel on trading approaches that enable us to treat all clients fairly and minimize the dispersion that can result from order sequencing or excess market impact through the appearance of multiple orders working in the market at one time,” Brooks said.
Lastly, Brooks noted The Boston Company’s partnership with consultancy Tabb Group, to dig deeper on venue and order routing. “We’ve started to gain some clearer insight into the efficacy of our brokers’ routing and venue selection decisions,” he said. “As a result, we’ve had substantive conversations with many of our top electronic counterparties that have led to changes in the algos that we utilize, the way that we access specific venues under various market conditions and whether or not we access certain venues at all.”