MiFID II update: Fund research costs a sign of alpha, says Amundi CEO
Yves Perrier, the CEO of Amundi, today gave a strong hint that his firm could retain its current stance to pass on research costs to clients and funds from next year under MiFID II.
Perrier said Amundi was still evaluating its position on research costs and whether or not to charge them to clients in the light of its acquisition of Pioneer. He also said there was a danger the coverage of under-researched parts of the market would be reduced, with knock-on effects for capital transmission and investors.
Asset managers must unbundle research costs from other costs when displaying fund charges under MiFID II rules. The majority have so far chosen to pay for research costs from their own balance sheets rather than pass them directly through to fund investors.
Speaking today in Paris, Perrier said 60% of Amundi’s total research was undertaken internally and the remaining 40% was external.
“When we define our policy we will be looking at internal and external people,” he said. “We are reviewing, in the context of the Pioneer acquisition, the way we will price funds in order to obtain our objective of being efficient for investors. We will continue to be a price leader when we will decide what to do with brokerage research fees.”
Perrier continued: “I ask all people to be cautious and reasonable and not to be impressed with some people who say it is good not to charge [research costs] to the fund. Funds that have no research costs [do so] because they don’t practise alpha [generation].”
Also speaking in Paris at L’AGEFI Global Invest, Alexander Schindler, executive board member and head of institutional business at Union Asset Management, and a former president of the EFAMA European funds association, said that asset managers were likely to reduce their external research budgets by 30% as a result of the MiFID II requirements. This would have a further effect on investment bank income and sell-side research provision, he said.
Dan Waters, CEO of ICI Global, the international offshoot of the US Investment Company Institute, noted that the EU was setting the pace internationally in terms of investment management cost transparency.
More managers to absorb research costs
Both State Street Global Advisors (SSGA) and Columbia Threadneedle Investments have declared this week that they will absorb investment research costs.
A spokeswoman for SSGA said: “We believe that this approach will result in the best outcome for our clients under the directive [MiFID II]. We will continue to engage with external research providers to ensure we are receiving the highest quality service to support our internal processes. Due to the strength of our internal investment research capabilities we have never been overly reliant on external research. We will continue to use external research only where it is additive to our own capabilities.”
In a statement, Columbia Threadneedle said its processes used “in-depth internal research supplemented with specialist research acquired from third party research providers. This enables us to selectively access broader knowledge to generate performance across our strategies.”
In addition, Swiss boutique RAM Active Investments has also said it will meet the cost of investment research itself. Thomas de Saint-Seine, CEO, said its systematic funds relied purely on in-house research, while fixed income costs would be met by the company.
DC Thomson backs ERIC research tool
DC Thomson, one of the largest private media organisations in the UK, is partnering with Electronic Research Interchange (ERIC) to develop the latter’s investment research offering for ”the post-MiFID II world”.
The transaction will see DC Thomson acquire a material stake in ERIC, which will create tailored research solutions for investment managers and research providers.
The deal will provide the functionality to create advanced search options for a library of content capable of adding more than 200,000 research documents on a daily basis to ERIC’s platform.
Russell Napier, co-founder of ERIC, said: “We are excited to partner with DC Thomson to bring both buyers and sellers of investment research world class digital publishing expertise. DC Thomson’s support allows ERIC to retain a vital independence of ownership in a marketplace where transactions need to be highly confidential. This partnership allows ERIC to offer both off the shelf and bespoke solutions across the industry.”