A large chunk of the UK's top asset managers have agreed to bear the cost of investment research themselves, rather than passing it on to clients from next year, according to consultancy Alpha FMC.
The upcoming new European Mifid II rules, designed to increase transparency in how fund managers are spending investors' money, mean firms will now have to pay for investment research rather than receiving it for free after paying a commission to brokers.
Alpha FMC found 48 per cent of the Investment Association's top 50 fund managers had agreed to bear the costs.
But, more worryingly, 10 per cent of fund managers said they have not yet finalised their plans as to how they will pay for research – even though the rules are due to come into force in less than three months. A further 40 per cent are yet to reveal their decision.
“The direction of travel is becoming increasingly clear and the way that research will be consumed, assessed and paid for by asset managers will look very different in 2018 as a result of Mifid II,” said Andrew Glessing, head of regulation and compliance at Alpha FMC.
Firms such as M&G Investments, Legal & General, Schroders and Woodford have announced they will stop charging for research.
City A.M. understands that some of the largest research providers have mooted an annual subscription cost of £30,000 to £40,000, although there are also tales of fund managers trying to haggle that price down in return for receiving more selective research.
Alpha FMC added that a number of fund houses are devising ways to combat the cost of research by taking more functions in house, investing in quantitative operations and artificial intelligence.
Just two per cent of the UK's top 50 fund managers have said they will make their clients pay for the new separate research costs, although Fidelity International confirmed it would yesterday as it revealed a shake-up of its management fees.