Trading costs can represent one of the largest single expenses incurred by pension plan sponsors. To assist asset owners and managers in better understanding the magnitude and impact of these expenses, State Street offers trade cost analysis and reporting, an independent monitoring and management tool that can help sponsors track and lower both implicit and explicit execution costs incurred by their funds’ daily activities.

State Street’s service helps customers improve efficiency by measuring brokers and traders, lower expenses by using trade-cost analytics, and fulfill the fiduciary responsibility of monitoring trading-related costs.

A VALUABLE RESOURCE FOR TRACKING AND REDUCING COSTS

For institutional customers, our trade cost analysis measures three main cost components - commissions, fees and market impact - against a universe, or grouping, of peers. The analysis of these components provides an estimate of how much the size of institutional orders affects the price at which trade orders are filled. When trades are not handled properly, negative price impact can cost investors far more than the commissions and fees levied by intermediaries. This analysis can be used to reduce overall portfolio trading costs. The trading benchmarks we offer include: VWAP (Volume Weighted Average Price), Implementation Shortfall, Arrival Price, Average Price, Open Price, Close Price, Previous Night’s Close or any other customized benchmark based on client requirements.

This analysis also addresses legislative focus in countries including the United States and the United Kingdom, such as “best execution” requirements identified by the US Securities and Exchange Commission, the CFA Institute and the Financial Services Authority in the UK.

COMPARE AGAINST A BROAD UNIVERSE

Our comprehensive trade cost analysis offering includes:

• Global Equities Trade Cost Analysis examines equity transaction costs in 47 countries. Information on trading costs, commissions, fees and the market impact of global equities is summarized and reported by manager, broker and country against a universe of institutional trades. State Street’s vast set of proprietary global trading data provides users with an objective look at how institutional trade costs compare to the marketplace and our universes in global equity markets.
• US Equities Trade Cost Analysis examines trading costs, commissions and the market impact in the US markets, comparing them to a universe of institutional trades. Market impact is scored by comparing the volume-weighted average price of stocks traded on either the NYSE or NASDAQ. Summarized reporting by manager, market capitalization and sector provides insight into the daily activities of each portfolio. Listings of highest and lowest cost trades are evaluated on trade date and benchmarked seven days forward for comparison.
• Global Fixed Income Trade Cost Analysis compares trading of all global corporate and government issues to the average price on trade date and to an institutional universe of trade prices. The analysis is then categorized by country, manager and broker at the trade level to identify high costs or outliers.
• US Fixed Income Trade Cost Analysis compares trading costs against the universe and the average price for that issue. Trading costs are established for US Treasury bonds, notes, bills, strips, high-grade corporate debt, plus agencies and corporate issues. Comparisons are made by manager and by broker. Trades that occur on announcement dates of 21 macroeconomic indicators are analyzed before, on and after the announcement date. State Street is the only firm to offer this level of comparative analysis of fixed income trade costs.

Additional services include:

• Executive summaries
• Custom charts and graphs
• Online, user-friendly drill-down capabilities
• Consulting for board and risk and compliance meetings, upon request

Available analysis timeframes:

• Real time
• T + 1
• Weekly
• Monthly
• Quarterly
• Semi-annual
• Annual

For additional information on our services, please visit the Elkins/McSherry website at: www.elkinsmcsherry.com or contact James Bryson at 917-790-4606 or jbryson@statestreet.com.