Mifid IIOct 4 2017

LGIM reverses 2016 fund charges overhaul

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
LGIM reverses 2016 fund charges overhaul

Legal and General Investment Management (LGIM) has become the latest fund house to change its mind on charging clients for broker research, with the company now deciding to absorb the costs onto its balance sheet.

A spokesperson told Financial Adviser that LGIM would pay for investment research on its equity funds when Mifid II rules come into force in January 2018.

The decision marks a change of heart for the firm, which has been charging investors via increases to overall fund management charges. The firm had announced these changes in January 2016, well in advance of peers, saying it wanted to be transparent with investors.

However, with the Mifid II implementation deadline drawing near, this summer has seen almost every other asset manager ultimately decide to pay for the cost of research themselves.

The LGIM change will only affect investors in LGIM's active equity funds, with its fixed income portfolio managers already absorbing the cost of external research.

The move relates to Mifid II regulations which force brokerage houses to separate out fees they charge asset managers for research on individual stocks or markets from transaction charges. The rules are intended to give fund houses and end investors more transparency on how much they pay for each aspect of investing.

Other large asset managers such as BlackRock, JP Morgan Asset Management and Vanguard have all opted to absorb costs. Several of those who who initially said they would charge investors, such as Schroders, Invesco and Janus Henderson, changed their policies to fall in line with the market.

Not all have decided to absorb costs. Yesterday (3 October), Fidelity International said it would charge investors for external research. However, the firm announced this as part of a wider restructure of its active fund management fees and said investors would be charged lower fees overall.

LGIM's head of retail for Emea, Honor Solomon, recently hinted that the firm might change its position on the unbundling rules.

She said: "What we were pushing for is transparency of cost and to make sure we were a first mover. But it is something we are looking more and more into as things evolve. We are continually looking."