Four of Europe’s biggest institutional asset managers have reversed decisions about how to pay for external investment research costs under MiFID II.

Schroders, Invesco, Union Investment and Janus Henderson have all today announced they will absorb costs onto their balance sheets. All four previously indicated they would pass this cost on to clients as part of fund management charges.

Under MiFID II rules coming into force in January, asset managers must disclose separately the costs for independent investment research. Currently, for equity funds, these costs are included in transaction charges and broker commission.

In a statement, Schroders said it had decided to extend its existing policy not to pass on costs – currently applicable to its quantitative and fixed income strategies – to include its entire equities business.

Speaking to analysts in March following the publication of the company’s annual results, Schroders’ global CEO Peter Harrison had indicated that it would continue to charge clients, but in today’s statement he said the firm had “concluded that we should absorb the cost of research for those clients affected by MiFID II”.

Hans Joachim Reinke, CEO of Union Investment, said of his firm’s decision: “From the outset, our objective was that the total amount of future transaction and research costs would not be any higher than they are currently. We therefore anticipate that, following our decision, the total costs for our customers will be lower.”

Invesco said: “We are committed to ensuring our investment professionals have access to the external research market, which is critical to decision-making and delivering the long term investment excellence our clients have come to expect from Invesco.”

Janus Henderson Investors also issued a statement saying it would pay for research, contrasting with earlier reports that it intended to pass the cost on. Co-CEO Andrew Formica said there had been “a marked shift in the delivery and pricing of research”.

“Our decision today reflects our commitment to working on behalf of our clients to provide the best solution to meet their needs,” he added.  

Decisions made so far

In total, only 31 of Europe’s biggest asset managers have so far declared how they will comply with unbundling rules, IPE research shows. Based on IPE’s Top 120 list of European institutional asset managers, just over a quarter have chosen between charging the cost of independent investment research to their clients or absorbing the cost themselves.

The U-turns from Schroders, Janus, Invesco and Union emphasise a clear preference among asset managers for paying research costs themselves.

This week BlackRock – the biggest fund manager in the world by assets under management – said it would pay the costs itself rather than pass them on to clients.

Newton Investment Management, Aberdeen Standard Investments, Aviva Investors, AXA Investment Managers, Insight Investment, Deutsche Asset Management and Franklin Templeton have all made similar decisions in the past few days.

All but one – Amundi – have opted to pay for research through separate accounts rather than charge directly to investors. Amundi had not responded to a request for comment at the time of publication.

Here is the list in full, correct to 15 September 2017 (AUM refers to European institutional assets only):

Company2017 AUM (€m)Who pays?
BlackRock 911,955 Manager
Legal & General IM 792,950 Manager
Insight IM 537,983 Manager
Aberdeen Standard Investments 393,759 Manager
Amundi 309,169 Client
Deutsche Asset Management 230,789 Manager
UBS Asset Management 169,643 Manager
Schroders 139,634 Manager
JP Morgan Asset Management 131,707 Manager
AXA Investment Managers 125,466 Manager
Allianz Global Investors 91,402 Manager
Robeco Group 80,105 Manager
Northern Trust AM 67,379 Manager
Union Investment 63,812 Manager
Vanguard Asset Management 61,837 Manager
Baillie Gifford & Co 52,857 Manager
Newton Investment Management 43,719 Manager
Aviva Investors 42,856 Manager
Janus Henderson Investors 40,997 Manager
NN Investment Partners 36,382 Manager
Invesco 34,004 Manager
Hermes Investment Management 33,423 Manager
Kempen Capital Management 32,274 Manager
Russell Investments 24,922 Manager
Franklin Templeton Investments 19,440 Manager
BlueBay Asset Management 18,565 Manager
Unigestion 14,968 Manager
J O Hambro Capital Management 14,773 Manager
T Rowe Price 11,759 Manager
First State Investments 11,282 Manager
TwentyFour AM 9,175 Manager

Notes: AUM figures based on institutional assets, taken from IPE’s Top 400 asset management survey, correct to 31 December 2016. MiFID II decisions sourced from company releases and public reports as of 15 September 2017.

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