2. Research Budgets

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  1. A Research Budget (the “Budget”) will be calculated through an auditable valuation process and an assessment of internal demand, set by either a fund or group of funds that have identifiable and documented commonalities in terms of focus and requirements.
  2. Budgets will be set on an annual basis but may be reviewed quarterly or monthly. Budgets will be set in monetary terms.
  3. Budgets for each fund group will be calculated using input factors including AUM (Assets Under Management) and other considerations.
  4. The RPA can exist alongside research procurement from the asset manager’s own resources. To avoid cross subsidisation, research funded in this manner will need to be widely available across all research budgets.
  5. The total amount of research expense charged to clients must not exceed the budget and should not be linked to the volume or value of transactions. Budgets will be communicated to clients using either the investment management agreement or the asset manager’s general terms of business. The frequency and mechanism used to effect the charge, based on the budget, will be communicated to the clients.
  6. The resulting payments made to research providers will not exceed the budgeted amount, but may be less and, in these cases, there should be a process to rebate those funds or offset them against research budget and charge for the following period. Increases in the research budget shall only take place after the provision of clear information to clients about such intended increases.

  7. Asset management firms will have the freedom to renegotiate on a quarterly basis the amounts payable to their research providers (the “Providers”). Where annual totals for a Provider differ from predicted levels, detailed explanation will be provided to clients.
  8. Asset Managers will perform an assessment to identify situations where pricing of research has become so discounted as to potentially constitute an inducement (for example where it is clearly being offered below cost price). In these cases asset management firms will ensure that best execution rates and trading volume are monitored and documented.
  9. A guide pricing structure and contract for their services will need to be agreed and documented for each research provider in order to be included in the research budget.

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