Soft-dollar arrangements
A historical industry practice where a fund manager directs brokerage to a counterparty in return for research, market data, or other services. In NZ retail PIE schemes the practice is disclosed and increasingly limited under current FMA expectations.
A soft-dollar arrangement is the historical industry practice of a fund manager directing trade execution to a particular broker in return for non-execution services — research reports, market-data terminals, conference access — bundled into the brokerage rate. The cost is paid out of fund transaction expenses rather than the manager's own profit-and-loss.
NZ FMA expectations under the Financial Markets Conduct Act 2013 require any soft-dollar benefit received by the manager to be disclosed in the OMI and to be assessed against the manager's statutory duty of care to unit holders. The trend in NZ retail PIE schemes has been to limit or unbundle soft-dollar arrangements, with research costs absorbed by the manager directly.
When inspecting a fund's cost structure beyond the headline annual fund charge, the OMI conflicts and related-party sections are the canonical disclosure for soft-dollar practice.
Related terms
-
OMI
Other Material Information (OMI)
A supplementary FMA-required disclosure document containing material information about a fund or scheme — typically conflicts of interest, related-party transactions, fee waivers, auditor/trustee/custodian identities — that is not included in the PDS.
-
AFC · Total fund charge · MER
Annual fund charge
The total ongoing percentage charge paid out of a NZ managed fund each year — covering management fees, supervisor/custodian fees, audit, and other operating costs.