REIT ASIAPAC
L E G I S L AT I O N
W H O PAYS F O R R E S E A R C H ?
This hollowing out of research and
corporate access personnel in the region
and fund managers’ unwillingness to
pay for corporate access has meant
that internal investor relations teams
and managers
themselves have had
to shoulder more of the work. Asset
management companies are hiring
research staff and organising meetings
and roadshows using their investor
relations teams.
Daniel Feldman,
Senior Analyst at Timbercreek Asset
Management
The loss of some of
the experts from the
industry may also
affect the quality of the
research,
Daniel Feldman
Senior Analyst at Timbercreek Asset
Management
The loss of some of the experts from the
industry may also affect the quality of the
research, adds Feldman.
only applies to firms that have a physical
presence in Europe that are operating
under MiFID and regulated by a European
regulator. However, non-EU firms that
manage European mandates will face
competitive pressure as clients gradually
expect the level of transparency that they
are receiving from firms in Europe.
O P E R AT I O N A L C H A L L E N G E S
Daniel Feldman, a senior analyst at
Timbercreek Asset Management, told
REIT AsiaPac that the company had been
affected by MiFID II in two ways.
“First we met with the brokers whom
we work with and discussed how they
should be remunerated for their services.
Second, the research departments at
many banks have seen a tremendous
shift of people leaving the sell-side and
repositioning on the buy-side or taking up
alternative positions within the industry,”
says Feldman. Timbercreek has about $8
billion in assets under management.
To mitigate the cost of research,
Timbercreek foresees executing trades
through algorithms, although the new
ruling also requires automated systems
to be MiFID compliant. “More pressure
on securities transactions will most likely
occur as a consequence,” he says.
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MiFID II proposes two methods to pay for
investment research:
• The P&L method where
investment firms fund the
research themselves from their
own resources
• The Research Payment
Account (“RPA”) method where
the costs of research would be
funded by the client.
A survey by UK’s Investor Relations
Society and QuantiFire, an investor
relations service provider, found that 92%
of investors expressed that corporate
access is important to their investment
process and 43% state that corporate
access is critical in their decision-making
process. However, 51% of investors do not
intend to pay for corporate access; 32%
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plan to cover the charges as a direct cost,
and 17% choose to pay a separate charge
from the research payment account. The
survey involved 302 financial institutions
including half of the top 20 investment
firms globally. The majority of investors
anticipate that companies will either
increase their internal investor relations
resource or begin to use independent
corporate access providers instead.
In general, fund managers find the number
of procedures required to comply with
MiFID II to be demanding. Feldman
at Timbercreek says that the industry
is adjusting to the changes and some
flexibility in the arrangements among
banks, broking houses and institutional
investors would help ease operational
challenges.