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Asset managers concerned by MiFID II’s research unbundling

Research has shown that over 70% of asset managers will be re-examining their sources of research due to upcoming regulation.

Under the updated markets in financial instruments directive (MiFID II), asset managers are required to unbundle broker research costs from other services and either absorb research costs or set up a research payment account.

But research conducted by Electronic Research Interchange (ERIC), found that 74% of managers will both apply greater scrutiny to sources of research and also foresee a reduction in investment bank research.

ERIC’s European asset management survey also found that 38% of asset managers are considering expanding internal research teams and the same percentage are not confident of being prepared for MiFID II unbundling.

However, the firm found asset managers broadly agree that the aims of MiFID II unbundling rules are “virtuous”. But over 7 in 10 (74%) believe that the buy-side should bear the cost of research.

There is what ERIC calls “a third way”. Over half of respondents (57%) highlighted the rise of alternative research distribution platforms as the answer, through which asset managers will be able to access specific and targeted pieces of research for a clear fee.

The survey was conducted during the fourth quarter of 2016. Ninety-one respondents were surveyed online, with respondents from the buy-side, sell-side and analysts, wealth managers and custodians across the United Kingdom and Europe.

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