The unbundling of research costs under MiFID II could be “a very important accelerator” of long-term investing, according to Kempen Capital Management’s chief investment officer.

“There is overwhelming evidence that a long-term focus creates more value”

Lars Dijkstra, Kempen

Lars Dijkstra, whose investment teams oversee more than £45bn (€50bn) in assets, told IPE that the new rules would add to the growing trend of asset managers bringing research capabilities in-house.

Kempen earlier this year announced that it would pay for investment research from its own balance sheet rather than pass the cost on to clients, a move subsequently followed by a majority of asset managers.

“If you look at the active management industry, as an industry we don’t add value,” he said. “There is pressure on the buy side from passives to deliver value. In my view that means you have to focus on long-term, highly active, high-engagement portfolios. Probably 80-90% of sell-side research doesn’t qualify for that, which means you have to do the research yourself.”

While investment banks and other research providers are scrambling to price their offerings for a MiFID II market, Dijkstra argued that the provision of research would become a question of quality rather than price in the years ahead.

“There is overwhelming evidence that a long-term focus creates more value,” he said. The shift towards long-term investing “has been going on for the last 10 years, but MiFID could be a very important accelerator”, he added.

Analysts that focus only on the last quarter or the next quarter would get less attention, Dijkstra said, as more investors engaged with companies on a long-term basis.

The CIO added: “Most of the dialogue we want to have with companies we can do on our own. We want to have our own long-term relationship with companies. In general we would ask different questions than those relating to the next or last quarter.”

Dijkstra’s comments reflected a report published this week by Aviva Investors calling for significant reform of sell-side research provision.

The UK asset manager argued it needed to be “rational and commercial” for providers to consider long-term sustainability issues as well as short-term financial performance. It called for clients and regulators to take steps to encourage this change.

“If the buy-side makes it clear that it expects, needs and values a far greater focus on long-term sustainable research, then practice and habit will change and the sell-side will respond,” Aviva Investors said.

“It is a clear way for sell-side analysts to differentiate themselves from peers and offers a degree of protection in a fiercely competitive environment. It would align the research with the needs of long asset managers to invest over the long-term and deliver long-term performance.”

Aviva’s full report, Investment Research: Time for a Brave New World?, is available here .

How asset managers have moved

IPE is tracking asset managers’ decisions on the unbundling of MiFID II research costs based on our annual list of the Top 120 European institutional managers.

So far, 37 managers have declared their intentions, with just two planning to charge clients directly. Amundi is reviewing its plans to charge clients, while Fidelity intends to overhaul its equity fund fee structure globally.

A spokesman for APG, the asset manager for Dutch civil servants’ pension scheme ABP, said the firm was in discussions with its clients but no decision had yet been reached.

For updates/queries relating to this list, please contact .

Last updated: 6 October 2017

CompanyAUM (€m)Who pays?
BlackRock 911,955 Manager
Legal & General IM 792,950 Manager
Insight IM 537,983 Manager
APG 443,194 in discussions
Aberdeen Standard Investments 393,759 Manager
Amundi 309,169 Client*
Deutsche Asset Management 230,789 Manager
Goldman Sachs AM 223,210 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
HSBC Global AM 90,636 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
Record Currency Management 48,552 Manager
Newton Investment Management 43,719 Manager
Aviva Investors 42,856 Manager
CBRE Global Investors 41,000 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
Barings 25,894 Manager
Russell Investments 24,922 Manager
Fidelity International 23,281 Client
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 relate to European institutional assets only, and are expressed in euros. Data from IPE’s Top 400 asset management survey, correct to 31 December 2016.

* Under review; no final decision