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Capital Markets

Paying the right amount

FSA renews pressure on equity research

Regulation isn't the only factor driving unbundling. For some fund managers it is simply about performance and common sense.

Norges Bank Investment Management (NBIM), which manages the NOK 940.7 billion ($148.1 billion) Norwegian state petroleum fund, is a leader in the field of monitoring its transaction costs and in using objective means to make commission allocation decisions.

"When the fund started investing in equities in 1998, we knew that given its size and large cash flows that transaction costs were always going to be something that we'd have to watch tightly," says Stephen Hirsch, COO of NBIM. "Although it was the bull market and others weren't focused on this, we put the systems and procedures in place to monitor transaction costs right at the start. Commissions may be a relatively small proportion of transaction costs but it can still add up to an enormous amount of money for a fund of our size. If you can't measure it you can't fix it."

NBIM's trading and order management systems track every service the fund receives from its brokers. The trade database logs the details of every trade including the broker, the individual sales trader and how much capital was committed as well as the bid offer spread and market impact data.

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