Use of soft-dollar commissions by U.S. money managers appears to have stabilized, in terms of both total dollar volume and the proportion of managers involved, after declining in recent years, according to a new report by Greenwich Associates. Based on a survey of 400 firms with the highest commission payouts, the proportion using soft dollars in 2005 held steady from the year before at 73%, compared to 82% in 2003 and 86% in 2002, said John Feng, a consultant with the firm.
The total amount of soft-dollar commissions used to purchase third-party equity research or other services held steady at $970 million, after dropping from $1.2 billion in 2003 and $1.5 billion in 2002.
The percentage of firms using soft dollars and the expected total outlays are both expected to remain roughly the same in 2006, said Mr. Feng.
The results suggest the fallout from the late-trading scandal that rocked the industry starting in September 2003 has largely been played out. However, any larger conclusions will have to wait for guidance the SEC is expected to issue this summer on soft-dollar usage, Mr. Feng said.
The percentage of mutual fund firms that reported using soft dollars, however, continued to fall - to 65% in 2005 from 75% in 2004. In a news release, Greenwich tied that decline to the "especially close regulatory scrutiny" of mutual funds. By contrast, 83% of firms that focus on institutional money reported using soft dollars. Only 57% of hedge funds surveyed reported using soft dollars.
The survey showed the most common targets of soft-dollar purchases are financial market quote services, financial databases and third-party research.