Hermes joins Woodford in scrapping research charges

Hermes joins Woodford in scrapping research charges

Hermes Investment Management is the latest big player to take on board the cost of external analyst research.

As first reported on FTAdviser's sister title FTfm, the fund manager, which oversees £30bn of assets, has joined Jupiter and Woodford Investment Management by absorbing the costs associated with investment management.

The fund houses are taking steps ahead of EU rules on how investors pay for analytic research, set to come into effect in 2018.

Under MiFID II, asset managers must present a clear budget for research to clients, with the aim of making it easier for investors to research the ins and outs of research cost themselves. 

Eoin Murray, head of investment at Hermes, told FTAdviser: “We arrived at this decision about six to nine months back, anticipating MiFID II, and to be honest it’s one we are comfortable with.

"It may take time for others to catch up, but removing charges helps streamline our business. It also helps our clients understand our costs.” 

Hermes has met with most of the 60 research providers to discuss prices.

Mr Murray said “some figures are eye-raisingly high, and others are most realistic”. 

He added any bank hoping to charge hundreds of thousands of pounds for annual access to their research is unlikely to win Hermes’ business.

Prior to MiFID II fund companies could receive research from banks and brokerages for free, although costs were added to trading prices. Now, providers will need to specify how much they think their research is worth. 

Other asset managers, including Amundi, Janus Henderson, Schroders and Man Group, plan to continue to pass this cost on to their clients. Many large fund houses are also expected to cull the number of external research providers they use in an effort to control costs.