Managers should cover research costs, pension funds tell IPE
More than eight in 10 pension funds think asset managers should pay for the cost of independent investment research under MiFID II rules, according to a poll conducted by IPE.
The remainder said managers should calculate the cost of the research at a flat rate and pass this on.
The pension funds were polled as part of IPE’s October focus group survey – see IPE’s upcoming October magazine for more.
One pension fund said: “We are totally against passing research costs to our scheme.”
Another added: “The research should be part of the daily job of the asset manager.”
Pension funds have largely been absent from the debate about MiFID II and research costs, with the focus so far being on whether investment managers will pass them on to investors or cover them internally. The deadline for MiFID II implementation is January 3.
Barings is the most recent major asset manager to have publicly announced its decision. Yesterday it said it would absorb external investment research costs for the $288bn (€240bn) firm’s global equity, multi-asset and fixed-income portfolios.
In announcing its decision, Barings said it had been expanding its in-house research capabilities over the past several years, thereby reducing its third-party research costs. It planned to continue expanding its proprietary research capabilities in the coming years in response to client needs.
In total, 34 of Europe’s biggest asset managers have so far declared or advised how they will comply with unbundling rules, according to IPE research.
Record Currency Management told IPE it had made the decision to absorb the costs of any research, and not pass it onto clients.
A spokesperson for Northern Trust Asset Management said that in the EMEA and APAC regions it does not currently use client’s commission for investment research and has no intention of changing that model.
CBRE Global Investors, meanwhile, told IPE it rarely receives investment research from third parties.
“Research typically received by CBRE Global Investors will be from our in-house research team,” said a spokesperson. “In such cases, we will absorb the costs ourselves and will not pass it on to clients.”
Germany’s Union Investment recently announced it, too, would take onto its books the costs of external research, veering away from the position it had previously indicated it would take.
Alexander Schindler, the executive board member responsible for international institutional business at Union, told IPE there was a “clear move” in Germany for asset managers not to charge clients.
Increasing the use of internal research and alternatives such as big data and analytics would follow from such a decision, he said, as well as changing research providers more frequently.
|Company||2017 AUM (€m)||Who pays?|
|Legal & General IM||792,950||Manager|
|Aberdeen Standard Investments||393,759||Manager|
|Deutsche Asset Management||230,789||Manager|
|UBS Asset Management||169,643||Manager|
|JP Morgan Asset Management||131,707||Manager|
|AXA Investment Managers||125,466||Manager|
|Allianz Global Investors||91,402||Manager|
|Northern Trust AM||67,379||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|
|CBRE Global Investors||41,000||Manager|
|Janus Henderson Investors||40,997||Manager|
|NN Investment Partners||36,382||Manager|
|Hermes Investment Management||33,423||Manager|
|Kempen Capital Management||32,274||Manager|
|Franklin Templeton Investments||19,440||Manager|
|BlueBay Asset Management||18,565||Manager|
|J O Hambro Capital Management||14,773||Manager|
|T Rowe Price||11,759||Manager|
|First State Investments||11,282||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 20 September 2017.
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