Thanks to everyone who joined our session today on Share Class Hedging. Please find below the key takeaways:
The tipping points for some of the buy side to outsource includes increased efficiency, reduced costs and outsourcing operational risk.
Operational risk is a key factor and how you manage this is highly important. A large decision lies around how you manage this risk- whether it be in-house or externally. This cost risk benefit analysis should be thoughtfully considered before moving forward.
Some consider outsourcing as too difficult and expensive. However, the conversation delved into the factors behind understanding why people do move towards outsourcing. Members were intrigued why a fund would do this- with the resultant answers being fo operational reasons, legal factors and operational protection. It was discussed whether it was a complete risk mitigation exercise or something which actually added value. Some mentioned that outsourcing ensured it was done cost effectively and accurately, alongside gaining comfort from the operational risk mitigation.
Members discussed the onboarding of share class hedging mandate as a distribution tool. The buy side were interested to discuss how they could achieve efficiency to settle the programme.
Members discussed benchmarking from a TCA perspective, including covering which factors are impacting performance of hedging class versus share class.
The role of the desk as a whole was discussed in the share class space. The hedge exists to ensure that efficiency is optimized.