JP Morgan Asset Management and Aviva Investors are among the big fund management names still “reviewing their options” on how to pay for investment research once Mifid II comes into force.
Mifid II, which is set to be implemented in less than six months, asks fund managers to decide whether to pay for research themselves – through their own balance sheet – or to charge investors through a research payment account.
JP Morgan AM, Aviva Investors, Columbia Threadneedle and T Rowe Price all have a significant presence in Europe but have not decided how to deal with the policy requirements.
An Aviva spokesman says: “We are undertaking a review of our charges and the clarity of disclosure across our ranges. We aim to ensure that what we charge is clear and, importantly, delivers value.”
A JP Morgan spokeswoman says their policy remains under review currently, a position echoed by T Rowe Price and UK-based Rathbones.
A T Rowe Price spokeswoman says: “Our decisions will be guided by complying with all regulatory requirements, ensuring that our clients’ best interests are protected, and preserving our ability to maintain access to important third-party research, which is additive to our investment process.”
Columbia Threadneedle Investments has expanded its European equity team from seven to 13 people in the past decade, but it said it has yet to finalise its position on how it will pay for research under Mifid II.
It is understood Vanguard will not charge clients for research and will continue to absorb external costs.
Old Mutual Global Investors and boutique asset manager Orbis declined to comment.
In June, research firm RSRCHXchange found that 85 per cent of respondents out of 450 fund firms expected to become compliant to the new research rules by the end of this year or later.
A number of firms, including Woodford Investment Management, Jupiter Asset Management, Aberdeen Asset Management, Hermes, Legal & General Investment Management have announced their intention to absorb the cost of research.
Henderson and Schroders said they would pass some of the costs to clients.
The Investment Association capital market specialist Ross Barrett says many asset managers are still “undecided” on their plans for research payments as they wait for other policy statements from the FCA.
He adds: “Firms are struggling with the level of uncertainty on what others are doing as well not just on price evolution but also on models evolution.
“I know brokers may present some models to firms but they change that very quickly and that makes it difficult on the buy side as you need price information. The IA tries to do models in the fixed income space and that is available already through some brokers.”
But Barrett says firms find a lot of complexity with the different methods of payments outlined in Mifid.
Barrett says: “It feels like the more you are zooming in the more complex [the rules] become so you need to zoom until you feel comfortable according to your budget.”
He adds: “Time and money is going to be spent to change the culture of asset managers. There’ll be less research coverage going ahead.”
Setting up research budgets is the biggest challenge for asset managers so far as they struggle to find cost information from brokers, says RSRCHXchange co-founder Vicky Sanders.
However, she argues larger firms are ahead with their plans compared to smaller players.
Sanders says: “Setting research budget is taking most of the time for more than a third of the firms we’ve surveyed. Three-fifths of respondents currently, or already, had put budget away.
“Firms need to ask [providers] as often and quickly as possible on what these costs are.”