BlackRock will pay for external research costs rather than passing payments to clients, under new European rules effective in 2018.
The Markets in Financial Instruments Directive II, which comes into play Jan. 3, will require financial firms with business or clients in the European Economic Area countries to separate research and execution payments.
The world’s largest money manager, which has $5.7 trillion, said in a statement provided by a spokeswoman: “Delivering the best outcomes for clients requires superior research that combines deep in-house capabilities with the best available external research. BlackRock’s internal research capabilities today include more than 300 professionals and leverage BlackRock’s unique technology, global platform and scale. We are committed to developing our internal capabilities, while ensuring our teams retain access to external research that adds value to the investment process. From January 2018, any external research costs incurred for MiFID-impacted funds and client accounts will be paid for by BlackRock.”
The firm joins a growing list of money managers agreeing to pay for external investment research.
Also Thursday, the €747 billion ($887.4 billion) AXA Investment Managers said it has “undertaken a thorough analysis of our internal research capabilities and our need for externally produced research” and has decided to “fully absorb the costs,” said Andrea Rossi, CEO of the firm, in a statement.
This week Insight Investment, with £552.3 billion ($715.6 billion) under management, said it would absorb all costs associated with externally sourced investment research.
"In delivering best-in-class, customized investment solutions for clients, we make extensive use of our highly regarded proprietary investment research capabilities, supplemented by external research where it makes sense to do so. Under MIFID II, where we choose to use third-party sources to supplement our own research, we will not pass those costs on to clients," said Adrian Grey, chief investment officer-active management, in a statement.
Franklin Templeton Investments, which has $740 billion in assets under management, also said it will pay for third-party research, "to ensure that all of our clients will continue to benefit from both our collaborative global research process and our access to third-party rTempleton Investments, which has $740 billion in assets under management, also said it will pay for third-party research, "to ensure that all of our clients will continue to benefit from both our collaborative global research process and our access to third-party research."
Deutsche Asset Management, with €711 billion, said it will take on costs, meaning "clients will therefore not be burdened with additional costs," said a statement from the firm. "Additionally, Deutsche AM will continue to purchase high-quality external research to ensure its fund managers have all necessary means for their investment processes. To this end, Deutsche Asset Management will negotiate with its third-party research providers to optimize costs."
Newly merged Aberdeen Standard Investments, with £583 billion in assets, will cover the cost of external research, as will the £55.2 billion Newton Investment Management.