ARP - Broker Dealer Practices

Alternative Risk Premia (or factor-based) strategies invests based on well understood, and academically documented, underlying factors. These  factors may explain and influence an asset’s risk and/or performance as building blocks for portfolio diversification. When institutional investors access this strategy via broker-dealer products, rather than managed funds, a different type of due diligence is necessary.

In this memo we discuss:

• The key distinctions between managed funds and broker-dealer products including areas such as fiduciary responsibility, product design, disclosures, costs and access.
• Key questions that institutional investors and asset managers should ask when conducting due diligence on broker-dealer products.