TCA is ultimately about insulating trading performance from changes in market conditions by providing information that leads to smart strategy choices and informed execution. Investment performance reflects two factors: the underlying investment strategy of the fund manager and the execution costs involved in realising those objectives. By taking transaction costs into account during portfolio construction, fund managers can achieve greater diversification, lower turnover, and better overall returns. TCA is a vital tool both for traders to understand and control the costs of execution, and for managers to understand the impact of these costs on the performance of their portfolios. By bringing hidden costs from below the waterline to the surface, investment firms are in a position to make better and more informed investment and trading decisions, with the ultimate goal of improving performance for funds and their end investors.
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