Mifid II forces fund managers to slash research spending
By Stephen Little
Fund managers are cutting back on research spending from banks and brokerages following the launch of Mifid II in January.
According to the Financial Times, European asset manager Candriam has reduced the number of brokers it uses from 100 to 70 since the beginning of the year.
Candriam chief executive Naïm Abou-Jaoudé the firm has had to “streamline” since Mifid II came into force.
The FT also reports Ostrum Asset Management, formerly known as Natixis Asset Management, has slashed the number of banks and brokerages from which it buys research by 20 per cent, taking the number of external providers to around 50.
Under the new regulation, asset managers are required to separate the cost of research from portfolio transaction costs, with most bearing the costs internally rather than passing this on to clients.
Ostrum says it has been quoted between €200,000 (£175,000) to €500,000 for full-service packages, with basic access to research platforms costing as little as €10,000 annually.
Meanwhile, the average annual cost Candriam pays to an external research provider has fallen from €175,000 to €120,000, although Abou-Jaoudé says this masks the range in what providers are charging.
One fund manager told the FT it was regularly offered access to all written reports and conferences for about £5,000 a year from providers, including large US banks.
Abou-Jaoudé says Candriam is “ranking the best research” to decide what is worth keeping, while Ostrum has a committee to monitor spending and value.
However, Hermes Investment Management has decided against reducing the number of research providers it uses.
Hermes Investment Management investment head Eoin Murray says: “We streamlined our coverage on a desk-by-desk basis [and] year-on-year, this resulted in a small reduction in the number of sellside research providers whom we pay for research.”