By Lukanyo Mnyanda
(Bloomberg) --Asset managers are slowly showing their hand on whether they’ll absorb the costs of research after new European regulations come into force in January. So far, most of them are taking the hit rather than passing them onto clients.
The European Union’s revision of the Markets in Financial Instruments Directive, designed to make markets fairer and more transparent, forces money managers to pay separately for research and trading services that they get from banks. That, the regulators hope, will ensure they act in the best interests of their clients, rather than being induced by the offer of free analysis.
Only a fraction of the approximately 4,000 asset managers that operate in Europe have publicly stated what they will do and bigger firms are showing a willingness to absorb the costs of analyst reports, reflecting their financial strength and a desire to avoid extra administrative work.
Jupiter Asset Management, which oversees $61 billion, expects to spend about 5 million pounds ($6.5 million) a year for research from other companies. Vanguard Group estimates the analysis will cost the firm less than $5 million a year.
Many bigger firms will probably choose to bear the costs themselves because of the complexity of charging clients, said Colin McLean, founder and chief executive officer of SVM Asset Management. The firm oversees about $900 million and has still to decide how to deal with research costs.
Companies that plan to absorb research costs:
- Aberdeen Asset Management (assets under management of $403 billion)*
- Allianz Global Investors ($594 billion)
- Baillie Gifford ($217 billion)
- Brooks MacDonald ($14 billion)
- BlueBay ($52 billion)
- Charles Stanley ($26 billion)
- Hermes ($39 billion)
- M&G ($368 billion)
- JPMorgan Asset Management ($1.9 trillion)
- J.O. Hambro Capital Management ($38 billion)
- Jupiter ($61 billion)
- Kempen ($58 billion)
- NN Investment Partners ($293 billion)
- Nomura Asset Management ($435 billion)
- Northern Trust ($1 trillion)
- Rathbone ($48 billion)
- Robeco ($175 billion)
- Russell Investments ($277 billion)
- TwentyFour Asset Management ($13.2 billion)
- T. Rowe Price’s U.K. investment arm ($904 billion for group)
- Unigestion ($24 billion)
- Vanguard ($4.4 trillion)
- Woodford Investment Management ($23 billion)
Companies that plan to pass on the costs to their clients:
- Amundi ($1.3 trillion)
- Carmignac ($73 billion)
- Invesco ($877 billion)**
- Man Group ($96 billion)
- Schroders ($546 billion)
- Union Investment ($370 billion)
*Figure for Aberdeen Asset Management as of March 31, before its merger with Standard Life
** Invesco says its preference is to charge clients, though the decision is subject to legal and regulatory issues that have yet to be resolved.