MFS Investment Management, the Boston-based asset manager, is to absorb the costs of the investment research it gets from banks worldwide, regardless of whether a fund is directly affected by regulations coming next year in Europe requiring more transparency in this area.
In Europe, a set of rules due to go into effect in January, called Mifid II, mandate that asset managers negotiate a price for research with brokers and then pay it out of pocket or pass it along to investors. Most companies there have said they will shoulder the cost themselves.
Currently much of this research is provided free of charge by investment banks, who recoup the cost when managers trade with them.
‘MFS has decided to assume all external research costs for clients covered by Mifid II, and we intend to do so for all clients in our equity and fixed income portfolios globally,’ the company said in a statement.
‘For MFS clients covered by the Mifid II research requirements, these changes will go into effect at the beginning of next year. For clients not covered by Mifid II and subject to different regulatory standards, the changes will be implemented in the coming months, where we are able to do so.’
In the US, most major fund managers have tended to assume the cost only for clients with holdings that are directly affected by Mifid II. But just yesterday BlackRock, the world's largest asset manager, said it may decide to pay out of pocket for the research provided by banks.
In an interview with Reuters, chief executive Larry Fink was quoted as saying, ‘One should expect we will be addressing this worldwide … we’re going to be looking at it.’
BlackRock has a research staff of more than 300. Fink told analysts on yesterday’s conference call for the firm’s third quarter earnings that increased proprietary research ‘will allow us to have more incremental and differentiated ideas.’ He said that there was no time frame for a decision and that BlackRock was discussing the matter with clients.