Vanguard to Pay for Stock Research Under MiFID Regulations

  • Decision will apply to the firm’s European funds as of January
  • Vanguard estimates annual cost at less than $5 million

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Vanguard Group, the world’s second-largest money manager, will pay for stock research it buys from banks rather than ask investors in its European funds to absorb those costs.

Under European Union rules that go into effect in January, fund managers must either pay for the analyst research or set up accounts to track the fees so the information can be disclosed. Large fund companies in Europe have opted for both approaches, according to Financial News, which earlier reported on Vanguard’s decision.

“Those research costs will be paid out of the management fees and therefore absorbed in Vanguard’s P&L,” Caroline Hancock, Vanguard’s head of European public relations, wrote in an email Monday. She estimated those costs would be less than $5 million a year. 

The new rules, known as Markets in Financial Instruments Directive, or MiFID II, are designed to bring more transparency in trading and boost returns for clients of asset managers and banks. Under the new system, funds will be setting aside budgets for broker research and assigning costs among teams, bringing closer scrutiny to their data needs and the value the information brings to each fund.

Vanguard manages $4.4 trillion, including more than $300 billion in assets outside the U.S.

— With assistance by Julie Edde

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