Four managers U-turn on MiFID II research costs [updated]

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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?
Legal & General IM792,950Manager
Insight IM537,983Manager
Aberdeen Standard Investments393,759Manager
Deutsche Asset Management230,789Manager
UBS Asset Management169,643Manager
JP Morgan Asset Management131,707Manager
AXA Investment Managers125,466Manager
Allianz Global Investors91,402Manager
Robeco Group80,105Manager
Northern Trust AM67,379Manager
Union Investment63,812Manager
Vanguard Asset Management61,837Manager
Baillie Gifford & Co52,857Manager
Newton Investment Management43,719Manager
Aviva Investors42,856Manager
Janus Henderson Investors40,997Manager
NN Investment Partners36,382Manager
Hermes Investment Management33,423Manager
Kempen Capital Management32,274Manager
Russell Investments24,922Manager
Franklin Templeton Investments19,440Manager
BlueBay Asset Management18,565Manager
J O Hambro Capital Management14,773Manager
T Rowe Price11,759Manager
First State Investments11,282Manager
TwentyFour AM9,175Manager

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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