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Survey finds that research budgets will decline

Chris Hamblin, Editor, London, 12 January 2017

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RSRCHXchange, the online aggregator and marketplace for institutional research, has been surveying the readiness of asset managers for the research unbundling rules that are to come into effect in January 2018 as part of the European Union's second Markets in Financial Instruments Directive.

Its conducted its survey, the biggest ever of its kind, towards the end of last year and canvassed the views of 234 respondents who represented more than 200 firms and $15 trillion in assets under management.

The survey shows a distinct shift of research budgets away from the top nine investment banks, with just 13% of respondents expecting to pay for research from all of the largest banks and 72% expecting to use research from less than five banks. The dominant market share of the global investment banks is likely to come under pressure with 67% of respondents expecting these banks to constitute less than 60% of their research expenditure in future.

Fund management firms did not expect their research budgets to fall dramatically. 42% expected them to remain the same in the next two years and 26% expected them to rise.

The asset management industry has plenty of work to do to meet MiFID II's 'unbundling' requirements, but it is, on average, planning to do so early. Around half of the respondents who expressed a view expected to be compliant by the middle of this year. 37% of them saw the job of setting a research budget and assessing it regularly as the biggest obstacle to compliance with MiFID II, while 23% saw the assessment of the quality of research as the most onerous concern.   

Even at this stage, 50% of respondents have not decided how they will pay for research when MIFID II is in place. 38% of those who did express a view said that they were planning to pay from their profit-and-loss statements.  

The survey has also reavealed that 86% of US funds anticipate the MiFID II rules on research unbundling to affect them eventually; 54% of respondents at the biggest funds expect their research budgets to fall; and written research is by far the most valued and most frequently consumed of all the research services. Jeremy Davies, one of the founders of RSRCHXchange, believes this decline in research spending with the big banks to be the main surprise of the survey.

RSRCHXchange has set up an aggregator that can handle research procurement and consumption in a MiFID II-compliant way. More than 1,000 asset management firms have signed up to it and about 185 research providers are posting their research notes and subscription content on it.

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