Sections

Diary of an Investor: Who bears the cost?

Sometimes I look back fondly on the simpler good old days. Our equities managers did business with brokers, who rebated part of the commission they earned on stock transactions – sometimes with a Bloomberg terminal that could be made available to the pension fund, but also through sell-side analyst research.

But such ‘soft dollar’ commissions have long had their day in this era of fee and cost transparency, and MiFID II is finally making sell-side brokers charge separately for analyst research. Asset managers must decide whether to absorb the cost or pass it on to clients.  

At Wasserdicht we have a research budget and there are a number of boutique houses with credible output but we don’t rate most sell-side output. My colleagues from around the world pretty much share the same view. We are looking carefully at the prices the market will place on sell-side research.

A meeting with Agnes, our account director at BIG Asset Management, was interesting. This summer, a number of asset managers have made their position clear on research costs but most have been waiting, probably to see which way their competitors move.

‘We have decided to absorb the cost of research,’ Agnes told us in late September. ‘There are pros and cons with each different approach but we feel we are doing best by our clients.’

Yet earlier in the year Agnes said she couldn’t see how managers could avoid invoicing clients separately for research costs, given today’s need for cost transparency. ‘How else will clients know the costs are being apportioned fairly,’ she told us. I reminded her of this. It made her look uncomfortable and she mentioned evolving internal practices.

‘We can assure you that we don’t intend to raise fixed fees to pay for these costs,’ she says. As far as we are concerned, the proof of that pudding will be in its eating.

Pieter Mullen is investment director at Wasserdicht Pension Funds

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • DS-2382

    Closing date: 2017-12-14.

  • QN-2383

    Asset class: Residential Property.
    Asset region: Ireland.
    Size: EUR 10m.
    Closing date: 2017-12-18.

  • QN-2384

    Asset class: Equities Switzerland (Large Caps).
    Asset region: Switzerland.
    Size: CHF 550 – 600 mn.
    Closing date: 2017-12-15.

  • QN-2385

    Asset class: Liability Driven Investment.
    Asset region: Europe.
    Size: Size: EUR 1 Billion, Liability size: EUR 3 Billion.
    Closing date: 2018-01-08.

  • QN-2386

    Asset class: Fixed income.
    Asset region: Global developed markets.
    Size: CHF 500 -1000m.
    Closing date: 2018-01-15.

  • DS-2392

    Closing date: 2017-12-21.

  • QN-2393

    Asset class: All/Large Cap Equities.
    Asset region: Europe.
    Size: EUR 200m.
    Closing date: 2017-12-21.

  • QN-2394

    Asset class: Real Estate Industrial.
    Asset region: Europe.
    Size: EUR 10m.
    Closing date: 2018-01-04.

Begin Your Search Here