MiFID II comes into force next year and research suggests that spending on broker research by asset managers to banks is to decline.
Under MiFID II – the updated Markets in Financial Instruments Directive – payment for research can no longer be bundled with other services and paid for using execution commission, as this would be considered an inducement.
RSRCHXchange, an online aggregator and research firm, polled 234 asset managers and found that only 13% expect to continue to pay for research from “all leading investment banks”.
The survey also found that 72% of respondents expect to use research from less than five banks.
The firm said that the dominant market share of the global investment banks in providing stock research is likely to come under pressure with 67% of respondents expecting these banks to constitute less than 60% of their research spend going forward.
However, fund management firms did not expect research budgets to fall dramatically. Conversely over a quarter of respondents (26%) expect their research budgets to increase in the next two years although 42% predict their research costs to remain the same.
The survey also found that 86% of US funds anticipate the MiFID II rules on research unbundling to impact them and that written research is by far the most valued and most frequently consumed of all the research services.
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