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What is a soft commission?

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BROKERS who offer clients soft commissions, or soft dollar deals, agree to provide certain services in return for business.

The broker then defrays some of the fund manager's costs by supplying specialist services which are supposed to assist the fund manager.

They can include research and advisory services, portfolio analysis programmes, data and quotation services, computers and investment-related publications.

The criteria in markets where soft dollar is allowed is that the services provided should all assist the fund manager in providing back-up to the client. Ruled out in Hong Kong would be travel, entertainment, accommodation or direct money payments.

The three specialists in Hong Kong are Hoenig, Thamesway (part of Reuters) and Tiedemann, but most international brokerages will be prepared to provide some soft dollar deals.

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