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The Spaulding Group launches Custodian Guidelines for Transparency in Benchmark Cost


The Spaulding Group has launched the “Custodian Guidelines for Transparency in Benchmark Cost” in partnership with BNY Mellon, State Street and Northern Trust. 

The “Guidelines” were developed with the goal to improve transparency on embedded fees for benchmark data, and enable investors to make informed decisions by understanding the details behind the fees they are paying.       
“The ever-increasing cost of benchmark data has been an issue that has grown in importance every year. It has been a major theme of our Performance Measurement Forums, and a hot topic of discussion at our annual Performance Measurement, Attribution and Risk conferences and in our surveys,” says David Spaulding, Founder and CEO of The Spaulding Group.
The Spaulding Group worked closely with three participating custodian banks to create a set of principles that the industry should abide by in order to increase awareness of the costs associated with indexes. This list of best practices is designed to lead to further efficiencies in the asset management industry by ultimately lowering fees paid by end-clients, predominantly asset owners.
The list of key principles which will be implemented over time by each custodian are as follows:

• Provide transparency to end-clients on the relative cost of benchmarks
• The total cost of using  benchmark data may also be taken into account, including index provider licensing fees, and the resources involved to collect and process the related files and data
• Conduct a free customised benchmark cost analysis upon request from clients that would demonstrate the relative cost of benchmark data options.
The environment for licensing the use of benchmark data continues to become more complex, while the costs of that data keep rising.  Providing transparency to our clients will help them understand the associated costs of their benchmark selection decisions which are required to monitor and analyse their investment portfolios,” says Samir Pandiri, BNY Mellon executive vice president and CEO of Asset Servicing. 
“We are focused on ensuring that clients have access to the tools necessary to make informed decisions,” says Brian Downer, senior vice president and head of Global Product and Platform Solutions within State Street Global Services. “This initiative will help our clients better understand the costs associated with benchmark data and its impact on their portfolio.” 
“Enhancing transparency on fees for benchmark data is an integral part of our commitment to client service,” said Fiona Horsewill, global head of product and strategy at Northern Trust. “Every basis point counts, particularly in an increasingly competitive investment management marketplace and the guidelines will enhance our clients’ ability to capture investment opportunities while managing risks and costs.”
In conjunction with the adoption of the “Guidelines”, Nasdaq has agreed to license its NASDAQ Global Index Family at no cost to custodian banks that abide by the guidelines set forth by The Spaulding Group and will be offered by BNY Mellon, State Street, and Northern Trust as a low-cost reporting option.
Banks can join by publicly acknowledging they will abide by the principles that have been outlined.
“As the industry examines the fees associated with benchmarks, Nasdaq is focused on providing low-cost indexes that span geographies and asset classes,” says John Jacobs, Executive Vice President, Global Information Services at Nasdaq. “We are excited to offer our Global Index Family to these custodian banks, as they work to increase transparency on the cost of index data. We applaud the work done by The Spaulding Group, BNY Mellon, State Street, and Northern Trust to bring this key issue to the forefront of the asset management industry.”

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