Issue: December 08/February 09
Editorials

ASSET CONSULTING

Too good to be true?

Kevin Kilroe

Kilroe... challenge on charges

Apparently not. Here’s an offer that can’t be refused before trustees give it serious consideration. Let competitors pick holes in it, or match it. Either way, the fat’s in the fire.

No longer will Brockhouse Cooper (BC), prominent abroad in stock broking and investment consulting, keep a low profile in SA. It is raising its profile in local asset consulting for SA pension funds with its value proposition that appears not only to be unique but that is bound to capture trustees’ attention.

The proposition is no fees for asset consultancy. A free lunch? All that pension-fund trustees are required to do is write to their asset managers, requesting them to allow BC’s trading team to compete on a best-price, best-execution basis for trades relating to the client’s portfolio.

There’s no other obligation, no catch in the small print, and no BC proprietary trading. So pension funds will be able to obtain an asset-consultancy service without charge, in exchange only for BC’s opportunity to compete for a portion of the brokerage. If their asset manager is not satisfied with the price or execution, there is no obligation to trade. Free consultancy for the leg-in to broking is the deal.

It’s an offer that can shake up the local asset-consulting industry. The landscape is dominated by a handful of large players, making it exceptionally difficult for smaller consultancies to break into top-tier size. This is the attempt by BC to make the leap and not as a one-off either. “Through our international remuneration model not to charge for consulting services, we go on risk for stock-broking business”, says local director Kevin Kilroe.

If you’re thinking that BC is a fly-by-night on a discount rampage, think again. As a stock broker, it offers agency-only, execution-only trading and transition-management services 24 hours a day across 50 markets worldwide. Last year it traded more than $16bn in securities for over 200 institutional clients.

As an asset consultancy, it specialises in asset-manager search, implementation and monitoring. Over the past five years it has conducted searches worth $9,5bn annually. SA clients for global manager searches include large parastatal and corporate pension funds.

Established three decades ago in Montreal, the SA operation was set up when exchange controls were liberalised in 1995 to allow offshore investment.

Last year BC secured new asset consulting business of R24bn. This year it was appointed by one of SA’s largest pension funds, boosting BC’s total assets under consulting to more than R40bn.

With a team led by Roland Grabe, it has introduced a full-service investment consulting department that intends to compete directly against the SA industry’s kingpins. Grabe, a CFA charter holder, joined BC in 2006 when he was sent to London for train-ing by Style Investment Research owner Robert Schwob. He then went on to the BC headquarters in Montreal where he was trained in the firm’s proprietary approach to portfolio analysis, manager search and performance measurement.

He reports “a very large new business pipeline” for next year. So the firm is now actively recruiting consultants to ensure service levels of the highest standard are maintained.

Kilroe throws a red rag at SA competitors. He claims BC is positioned “very differently”. Among the differences, he argues, “BC is able to offer international best-practice asset consulting at no cost other than brokerage”.

The big bulls are sure to charge (no pun intended) at that one.