River and Mercantile has confirmed that following the implementation of MiFID II in January 2018 and the unbundling of external research and execution costs, it will absorb the cost of external research.
James Barham, Head of Asset Management at River and Mercantile Group PLC, said:
River and Mercantile Asset Management LLP (RAMAM) has a very clear investment philosophy and process that has been applied to client portfolios since the business was founded in 2006. This process is known as PVT (Potential Valuation and Timing). External sourced research, alongside the proprietary developed screening tool “MoneyPenny” and the internal verification (research) teams, forms a critical part of this investment process and acts to validate our extensive internal research outcomes. The active management of our investment strategies based on this research has been demonstrated through the strong investment outcomes and has delivered significant added value for our clients since inception.
Historically, the external cost of research has been part of the total cost of investment reported to clients and has been segregated and budgeted by provider. Under MIFID II we will continue to manage and monitor external research providers in a similar manner. However, after a period of consultation with our clients we have decided that, effective from January 2018, the cost of this external research previously charged to clients will be absorbed by the Group. The estimated annualised cost of this change is expected to be £1.0 to £1.5 million, however this will be offset in part by a reduction in remuneration expense, leaving a net impact on profit of £0.7 to £1.1m. We believe this is the most appropriate course of action to support the strong competitive position of the business.