Old Mutual Wealth to Absorb Some MiFID-Related Costs

JOHANNESBURG (Capital Markets in Africa) – Old Mutual Wealth, a unit of Old Mutual Plc, said it will absorb some additional expenses when Europe’s MiFID II takes effect next year, though it hasn’t yet announced whether it will pass onto its clients the cost of external research for funds.

“Absorbing costs is something we have to do and we already are,” Paul Feeney, chief executive officer of Old Mutual Wealth, said in an interview in Johannesburg on Wednesday. “We will soon announce our stance on research.”

Deutsche Bank AG’s money-management unit, Vanguard Group Inc., JPMorgan Asset Management and Allianz Global Investors are planning to absorb the costs of revised European Union regulations known as Markets in Financial Instruments Directive. The rules force money managers to pay separately for the research and trading services they get from banks in order to spur the financial institutions to act in the best interests of clients.

“We suspect MiFID will improve transparency and the market will adapt and find a way to create value, Feeney said. “It will separate those that are creating value from those who are riding the coattails of big brand names.”

Looming Separation
As Old Mutual grapples with the imminent implementation of MiFID and the Brexit negotiations, it’s also just months away from listing its wealth and emerging markets units in London and Johannesburg as part of a plan to split up the entire business. The parent company has hired Goldman Sachs Group Inc. and Rothschild & Co. to advise on the listing and separation, while the wealth business has appointed JPMorgan Chase & Co., Feeney said.

Old Mutual Wealth is in Johannesburg this week to meet potential investors, many of which are already shareholders in the parent company, such as the Public Investment Corp., Feeney said. The unit is planning a capital markets day in November to introduce more investors to Old Mutual Wealth in London and Johannesburg and expects to produce a prospectus early next year, he said.

Reports have pegged Old Mutual Wealth’s value at anywhere between 2 billion pounds ($2.7 billion) and 5 billion pounds.

Ahead of the listing, the wealth division is reviewing its geographic reach and also mulling whether a sale of its single-strategy third-party fund-management business would make sense, according to Feeney. The company may buy one or two small financial-advisory firms before trading starts, he said.

Source: Bloomberg Business News