Crux to hike fund fees on Mifid II costs

Boutique firm Crux Asset Management will increase the cost of some of its funds as it plans to continue to charge clients for research after Mifid II, Fund Strategy can reveal.

Despite many peers having decided to absorb the costs, at the start of November the firm, created by ex-Henderson Global Investors star fund manager Richard Pease, informed clients about the new strategy on covering research costs, which under Mifid II must be disclosed separately from trading costs.

The highest estimated increase to the ongoing charges figure is for the two-year-old £154m Crux European fund, with a 5 basis points increase from 0.92 per cent to 0.97 per cent.

For the flagship £1.9bn European Special Situations fund, which Pease brought from Henderson along with co-manager James Milne, the research costs will add 3bps to the current OCF of 0.87 per cent.

The firm says the cost of research will remain under review.

Crux has been one of the first asset managers to explicitly quantify the increase to the OCF resulting from the Mifid II requirements.

Crux Asset Management marketing director Giles Kidd-May says disclosing research costs has not been “a PR exercise” for the firm.

He says: “It is about our unit holders and to provide value for money. We will continue to charge these costs to their respective funds as they’ve always been.”

But Kidd-May says there are other “significant” administrative costs around the European regulation. Excluding research, Mifid II will cost the firm £430,000 for next year.

He says: “We are a nascent business and we’ll continue to monitor [research costs]. By doing it this way we have the opportunity later, if we are able, to review it and change it.

“But if you decide to go backwards [and pay for research] in two years time you might not be in business because you’ve extended yourself with these costs, you can’t maintain your regulatory capital then you’ve not got business.”

In January Crux acquired Oriel Asset Management which brought its assets under management to £2bn.

Allocation of costs

According to a letter sent to investors from Fund Partners, Crux’s authorised corporate director, the boutique firm will “always seek to allocate research costs fairly to its various clients’ portfolios”.

Crux had set a research budget and account for more than one client at the time but in cases where portfolios are materially different in type of assets, sectors and geographies, funds will have separate research budgets and accounts.

Funds that share “sufficiently similar” objectives and research needs will be part of the same research account.

Information on the total research costs for the funds in relation to between January and September 2018 will be available to investors on January 2019.

Details will be given on amount paid by the asset manager into the account, the total amount paid to each external research providers, other “benefits and services” received by the asset manager and how the total amount spent on research compares with the budget set by the firm.

Bucking the trend

Other firms such as Miton, Carmignac and Fidelity International have decided to buck the trend of most rivals and continue to charge clients for research.

Miton chief executive David Barron says this approach, rather than paying out of the firm’s pockets, would make sure there is continuity for portfolio managers to access external research.

He says:“Setting a dedicated budget for the research we consume gives our clients a clear indication of the cost of this resource, and signals our commitment to continue to utilise market leading research in the new regulatory environment.

“The fund management industry is a crowded space and external research plays an important role in delivering good quality products and retaining a competitive edge.”

For an example fundp provided, the Miton Diverse Income Trust, the added research costs will be between 1 and 2bps.