PGI Deploys Broker-Evaluation Platform


MiFID II’s research de-bundling requirement has spurred many changes operationally within the buy side.

For asset manager Principal Global Investors, which has approximately $430 billion AUM, the upcoming regulatory mandate was a logical time to replace its internally developed broker-evaluation platform.

Three of 16 boutique lines of businesses that comprise PGI and share an equities trading desk-Align Investor, Principal Real Estate Investors, and Principal Global Equities- selected ITG to administer its research payment accounts and Visible Alpha’s ONEaccess research-evaluation platform.

Jennifer Sadiq, Principal Global Investors

“We had been looking to make modifications for quite awhile but knowing that MiFID II was coming for the last two and a half years, we wanted to get more clarity before we did any concrete modifications to our program,” Jennifer Sadiq, director of equities at PGI, told Markets Media.

Sadiq’s team began sending out requests for information in November 2016 after finding a variety of available third-party offerings. “The broker-review services had been a bit limited until the last couple of years,” Sadiq noted.

PGI first selected ITG with which it had a pre-existing relationship. “There is already a fair amount of data that moves between our organizations, which made the integration easier,” she said.

In May, the asset manager selected to implement Visible Alpha’s portal-based platform that went live on July 1 capturing content from PGI’s approximately 100 research providers.

Under the new workflow, PGI analysts will catalog and evaluate external research on a weekly basis.

“We realized a requirement to meet the directive, and we also think that it is very important to quantify what we are doing and why when it comes to consuming research but we want to be respectful of the analyst’s workflow and trying not to make too many disruptions to that workflow,” said Sadiq.

As a result, PGI developed a policy that defines “research” as content specifically requested by the asset manager and not the unsolicited emailed PDF reports and automated calls the sell side sends to all of its research clients.

“We have an interpretation now that we will use in preparation for January related to how we will have policies in place to definine what research is,” said Sadiq. “That is still underway. Right now, we are treating research in a way that we think is going to be our response.”

Sadiq doubts that having greater transparency on which research her firm consumes will affect the number of research relationship the asset manager has.

“We think our team already does a good job of discerning which research adds value and which doe not,” she said.

However, it may help PGI’s research providers to hone their content, Sadiq added.

“If we rejected their research, meaning that we found no value in it, I think this is going to help the sell side whittle down the research they provide us and no longer send us research that we are not even opening.”

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