BNP Asset Management Plans to Roll Out MiFID to Global ClientsBy
Firm will give to same levels of disclosure outside Europe
U.S. managers may inform clients about research costs
BNP Paribas Asset Management, which oversees 580 billion euros ($672 billion), plans to apply forthcoming MiFID regulations globally as money managers move to provide clients with more transparency on research costs and trading.
The Paris-based asset manager is one of the first to say that it will show clients the amount they’re spending on research regardless of where they are based. The rules are due to come into force in January.
“We plan to apply the principles of MiFID II as widely as possible,” Philippe Boulenguiez, who oversees research and trading execution for the unit, said in an interview. “It would be extremely complex for us to distinguish between portfolios covered by MiFID II and those that are not.”
Asset managers are grappling with the cross-border impact of the rules because they apply to funds based in the European Union, regardless of where clients are located. That increases costs and complexity because the investment vehicles are often registered in one jurisdiction but managed by teams all over the world. It may also lead to the rules becoming commonplace globally, consultants say.
“If I’m extending a great deal of research-spending transparency in Europe, why should I not treat my clients in the rest of the world the same way?” said Neil Scarth, a principal at Frost Consulting in London. “That’s a very important pressure that’ll be a transmission mechanism for this to spread globally. It is the changing expectations of asset owners that really, in a sense, is more important than regulators.”
Under the rules, money managers must pay for research separately from broking services. BNP Asset Management has opted to absorb the research costs on the fixed-income side but charge clients in equities through trading commissions, Boulenguiez said in the interview.
It will be simpler for the firm to apply the rules globally because it minimizes the risk of not valuing or fairly allocating the cost of broker research between clients, said Boulenguiez, who is Chief Executive Officer at BNP Paribas Dealing Services. About 21 percent of the asset management unit’s assets are managed outside Europe.
U.S. fund managers are now considering pricing and assigning research costs internally and disclosing it to clients, Amrish Ganatra, a managing director at research payment processing platform Commcise, said in an interview.
"They are getting clients asking for MiFID-style reporting to know what their budget is and how money is managed,” he said. "Even firms who do not have any MiFID exposure want to be MiFID-ready by putting in place best-practice solutions."