Taking a closer look at the Zeno Universe: Asset Manager Trade Process Universe League Tables FOURTH QUARTER 2013 An asset manager’s trade process is a function of both the Total Trading Costs incurred to build/unwind portfolio positions, and the amount of trading the manager engages in (turnover). Total Trading Costs x Turnover defines the impact a manager’s trade process will have on their overall investment performance. The tables below show Peer Group rankings for: Total Trading Costs (calculated on an implementation shortfall basis), Commissions, and Turnover. The rankings cover the four‐quarter average as of September 30, 2013. A glossary of terms is provided on page 2. Large Cap Growth Managers Efficient Total Costs Manager Vision Capital Management Columbia Management Wells Capital Management TCW Group GMO High Turnover Rank Manager 1 SunAmerica Asset Management 2 Rainier Investment Management 3 Fred Alger Management 4 Cornerstone Asset Management 5 Invesco Large Cap Value Managers Efficient Commissions Manager Jacobs Levy Equity Management GMO OakBrook Investments Rainier Investment Management Mellon Equity Associates Low Turnover Rank Manager 1 TCW Group 2 GMO 3 Morgan Stanley 4 Brown 5 Logan Capital Rank 1 2 3 4 5 Efficient Total Costs Manager Huber Capital Management Levin Capital Strategies Pzena Investment Management Metropolitan West Asset Mgmt T. Rowe Price High Turnover Rank Manager 1 JPMorgan Asset Management 2 SunAmerica Asset Management 3 Systematic Financial Management 4 Levin Capital Strategies 5 Principal Global Investors Rank 1 2 3 4 5 Rank 1 2 3 4 5 Small Cap Growth Managers Efficient Total Costs Manager Gabelli Securities TimesSquare Capital Management Granite Investment Partners T. Rowe Price Associates AllianceBernstein High Turnover Rank Manager 1 Wells Capital Management 2 Cupps Capital Management 3 SunAmerica Asset Management 4 Columbus Circle Investors 5 Clarivest Asset Management Small Cap Value Managers Efficient Commissions Manager Clarivest Asset Management Morgan Stanley T. Rowe Price GW Capital Eagle Asset Management Low Turnover Rank Manager 1 Gabelli Securities 2 Morgan Stanley 3 Invesco 4 AllianceBernstein 5 T. Rowe Price Rank 1 2 3 4 5 Efficient Total Costs Manager Schneider Capital Management Wells Capital Management Huber Capital Management Brandywine DePrince, Race & Zollo High Turnover Rank Manager 1 Wells Capital Management 2 SunAmerica Asset Management 3 Dreman Value Management 4 Systematic Financial Management 5 Vulcan Value Partners Rank 1 2 3 4 5 Rank 1 2 3 4 5 NonUS Developed Market Managers Rank 1 2 3 4 5 Rank 1 2 3 4 5 Efficient Total Costs Manager Mondrian Investment Partners Brandes Investment Partners Calvert Asset Mgmt Acadian Asset Management AQR Capital Management High Turnover Manager Marsico Capital Management Wells Capital Management Philadelphia International Advisors GMO AQR Capital Management Rank 1 2 3 4 5 Rank 1 2 3 4 5 Efficient Commissions Manager GMO LSV Asset Management Huber Capital Management SunAmerica Asset Management Affinity Investment Advisors Low Turnover Rank Manager 1 Barrow Hanley 2 Gabelli Securities 3 Focused Investors 4 Robeco Investment Management 5 T. Rowe Price Rank 1 2 3 4 5 Efficient Commissions Manager Huber Capital Management State Street Global Advisors Fisher Investments LSV Asset Management Dreman Value Management Low Turnover Rank Manager 1 Robeco Investment Management 2 Franklin Advisory Services 3 Franklin Templeton Investments 4 Earnest Partners 5 Dimensional Fund Advisors Rank 1 2 3 4 5 Emerging Market Managers Efficient Commissions Manager Lazard Frères Gestion AQR Capital Management GMO LSV Asset Management Acadian Asset Management Low Turnover Manager Marathon Asset Management Calvert Asset Mgmt Morgan Stanley Mondrian Investment Partners LSV Asset Management Rank 1 2 3 4 5 Rank 1 2 3 4 5 Efficient Total Costs Manager Quantum Capital Management Wells Capital Management FAMA Investments The Boston Company Asset Mgmt Lazard Frères Gestion High Turnover Manager Glovista Investments Franklin Templeton Investments Hermes Fund Managers Batterymarch Financial Mgmt JPMorgan Asset Management Rank 1 2 3 4 5 Rank 1 2 3 4 5 Efficient Commissions Manager Glovista Investments LSV Asset Management PineBridge Investments BlackRock Schroders Low Turnover Manager State Street Global Advisors Dimensional Fund Advisors Westwood Global Investments Lazard Frères Gestion Dimensional Fund Advisors Total Trading Cost Historical Trend (1Q10 to present) The chart to the left shows the historical Total Trading Costs of all managers reviewed by Zeno. For each quarter, the different bars represent the costs incurred by the 5%, 25%, 50%, 75%, and 95% ranked manager, respectively. 20 0 -20 -40 -60 -80 -100 5-Perc 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 25-Perc 1Q12 50-Perc 2Q12 3Q12 75-Perc 4Q12 1Q13 95-Perc 2Q13 Zeno Consulting Group, LLC | www.zenocg.com | Phone: (301) 312-8129 | Email: [email protected] 3Q13 Glossary of Terms Total Trading Costs the four-quarter average of total execution costs (sum of Multi-day Delay, Daily Market-Impact and Commission costs) paid in order to build/unwind trade orders. The difference between the more efficient vs. more expensive managers can often exceed 100 bp in trading costs. Efficient Total Costs show those asset managers with the lowest Total Trading Costs within a specific Peer Group Universe. Commissions (the explicit fees paid to brokers to execute trades) are typically the smallest, but most controllable part of a manager’s total execution costs – “The tip of the iceberg.” Efficient Commissions show those asset managers with the lowest average commission rates within a specific Peer Group Universe. High Turnover (annual trade volume of Buys and Sells divided by AUM), in and of itself is neither good, nor bad. However, the execution costs of managers with high turnover strategies have greater impact on investment returns. Accordingly, it is critical that high turnover strategies have efficient trading processes. Low Turnover (annual trade volume of Buys and Sells divided by AUM), in and of itself is neither good, nor bad. However, the execution costs of managers with low turnover strategies have a limited impact on investment returns. It is therefore less critical that low turnover strategies have efficient trading processes. Zeno Consulting Group, LLC (Zeno) is not an asset manager or broker. Zeno’s clients are Plan Sponsors/Pension Funds and other asset owners. Zeno's transaction cost analysis services are thereby designed to proactively monitor, and manage, our client’s asset managers’ trading processes free from conflicts of interest. Certain information contained herein has been derived from trade, statistical services, and other sources we deem reliable; but, we do not represent that such information is accurate or complete and it should not be relied upon as such. No guarantee or warranty is made as to the reasonableness of the assumptions or the accuracy of the models or market data used by Zeno or the actual results that may be achieved. These materials are not to be copied, displayed or transmitted in any form without the prior written permission of Zeno. Want to Learn More? For more information about where your Fund’s managers rank, please call (732) 851-4210 or email [email protected]. Zeno Consulting Group, LLC | www.zenocg.com | Phone: (301) 312-8129 | Email: [email protected]
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