French manager calls out ‘cheeky’ rivals over Mifid II research rules

Carmignac managing director Didier Saint-Georges

French asset manager Carmignac has called for more clarification on the new research costs rules under Mifid II as it claims rival firms have wrongly stated what the directive means for their business.

Speaking to Money Marketing after an event in Paris, Carmignac managing director Didier Saint-Georges referred to asset managers as “cheeky” in their language when explaining their approach to the new rules on research costs required by Mifid II.

Under the Mifid II legislation, which came into force this month, asset managers need to disclose how much they pay brokers for investment research separately from trading costs. Firms have to declare whether they pass these costs to their clients or pay out of their own pockets for it.

In September the €56bn (£50bn) Paris-based asset manager announced it was passing the cost of research to clients once the European regulation would come into force in January, contrary to most of its European and global rivals.

Will advisers be able to afford research after Mifid II?

Saint-Georges says: “There is a lot of confusion about this subject. I am hearing a number of asset managers saying they will absorb costs, but the reality is that Mifid II impacts what asset managers can do with their mandates, it doesn’t impact the mutual funds.

“Asset managers have been cheeky about [Mifid II]. They forget that when they say Mifid II clients, what they [should say] is mandates, so very often those asset managers have very few mandates and theoretically they will continue to charge the cost for all their mutual funds and only absorb for the mandates because that is the rule.”

Saint-Georges believes fixed income and passive fund managers are “a bit over the top” when they say they will pay for research themselves, as they are supposedly in less need of research compared to active managers.

He adds: “I count on media to clarify this positioning as when I hear the market saying [asset managers] will absorb the costs I don’t think that is true.”

Yet Saint-Georges couldn’t say if the decision to continue charging investors for research has been reflected in material changes in fund fees for Carmignac.

He says: “What we said [we will not absorb the research costs] we said that we are very transparent and won’t change anything. Many asset managers are not ready yet, we were ready ahead of Mifid II and were giving that information ahead of the requirement and we said all along that there is no reason to change right now with our providers that we consider very important.”

Carmignac has seen €400m inflows over 2017 helped by their bond funds.

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