Insights

MiFID II and Mondrian

January 2018

The Markets in Financial Instruments Directive II (MiFID II) takes effect in January 2018. This regulation increases transparency in investment management fees and charges. As an investment manager headquartered in the UK, Mondrian Investment Partners is subject to MiFID II.

MiFID II requires European-based investment managers to pay for externally-acquired research from a separate payment account controlled by the manager, but which is funded by a specific research charge to each client.

Alternatively, European-based investment managers may pay for externally-acquired research directly, without passing the cost on to their clients.

In June 2016, Mondrian adopted a policy to pay for all externally-acquired research directly without passing the cost on to our clients. From that date clients were only required to pay execution-only commission rates to brokers.

While Mondrian conducts most of its investment research internally, we do sometimes find value in externally-generated company analyses, industry analyses, and data. Mondrian has been working with our brokerage research providers for several years to evaluate and value this information. As part of this process, we began a transition toward the direct payment of research costs in 2016. From June 2016, the cost for all externally-generated research acquired by Mondrian, including brokerage-sourced research, has been paid directly by Mondrian. Although we had been trading at very low commission rates already, as a result of this transition to execution-only trading, the commission cost paid by our clients has been reduced even further. The payment of execution-only commission rates has increased fee transparency and reduced the cost borne by our clients for the management of their portfolios by Mondrian.

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