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MiFID II rules will require asset managers to make clear to investors how much they are being charged for research, ending the opaque system under which fund managers received free analyst reports in return for placing trades with banks and brokers. Joshua Maxey, managing director of Third Bridge, a research provider, said it will be “very difficult” for other asset managers to justify passing on research costs to investors now that industry heavyweights including BlackRock, Vanguard and JPMorgan Asset Management had decided to absorb the cost themselves. Groups that have yet to disclose whether they will absorb research costs or pass them to investors include Credit Suisse, Goldman Sachs Asset Management, Investec, Morgan Stanley, State Street Global Advisors and UBS.
BlackRock said it planned to develop its internal research capabilities, which include more than 300 professionals, at the same time as providing its managers with access to external research. “From January 2018, any external research costs incurred for Mifid-impacted funds and client accounts will be paid for by BlackRock,” the company said. Joshua Maxey, managing director of Third Bridge, a research provider said it was “very onerous” for asset managers that use multiple fund structures to accurately allocate research costs. Asset managers that operate separately managed accounts alongside retail funds also face problems in deciding how research costs should be allocated as they do not want to be seen to be favouring one type of client over another. Many simply do not want to take the risk of falling foul of the regulator, he said.
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