Soft Dollar? What Is That?

Maybe might not realise.... the investment managers are making money out of the brokerage that they trades for you.

In case you are noobs in stock investing, all trades that you do in share market will be charged a brokerage fees of 0.60% but since investment managers trade in huge volume, they are only charged eg. 0.30%.

When your unit trust trades in the market, the broker actually billed your fund 0.30%. Its the fund manager's discretionary to decide who is the broker ( in the case of mutual funds ). The question is WHO he will choose to execute the traders for him? On what basis of selection? Fees? Research? Relationship? Recipocal business? Execution?

What ever are the reasons, for 0.30% paid by using the investors money, the fund manager actually receive kicked back or softdollar from the broker.

Some investment managers (IM) doesn't receive soft dollar aka soft commission from the brokers because it's claimed that they get the best brokering fees thus no further kick back.

Some IM recieved the soft dollar but agree will put it back into the unit trust funds because it's investors money.

The tricky one are the IM that keeps the soft dollar for themself. I am not saying that's its not allowed or not ethical. As long as the soft dollar is used for research for the benefit of the investors, then it is perfectly fine.

Thanks to read my bla bla bla again... this is not a huhaaa thing in the market... just hope to bring some realisation or attention to you. The next time you pick up any unit trust prospectus, try to read for their soft dollar policy, you might find something suprising ;) FYI some use the softdollar for company dinner :) - of course this will not be disclosed in the prospectus. It's all ethical issue.