Asset Managers to Siphon $300m from Research Budgets Ahead of Regulations
- With MiFID II on the horizon, the investment research industry could be facing lower research budgets.
European and US asset managers are slated to usher in a round of cuts worth up to $300 million from research budgets due to a shifting regulatory atmosphere in the realm of market investment information.
As market participants and venues gear up for the long awaited passage of MiFID II regulations in January 2018, a number of conflicts of interest have been brought to light between managers and brokers, specifically with regard to the flow of information derived from research studies in the investment space.
Industry Headwinds?
According to a survey that included a total of 99 fund managers and traders conducted by Greenwich Associates, the investment research industry could be primed for a shakeup. The impetus behind this is the European Union’s MiFID II regulations. As such, these rules require asset managers to disaggregate their trading commissions from investment-research Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term, and will likely Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term a negative impact on the amount of commission money that is spent on research and advisory services,
These cuts will not represent dramatic reductions per se at individual asset managers, however the aggregated spending from research providers across the board will equal a more substantial sum, according to a Bloomberg report.
Bloomberg
In particular, the aforementioned survey is equated to a nearly 7 percent decrease in overall commission spend for European institutions and a 5 percent drop for their US counterparts. Moreover, these reductions would contribute to a nearly $200 million decrease in US research commissions spent along with a decrease of more than $106 million in Europe.
The shifting of regulations could dramatically change the existing research playing field with several industry mainstays enjoying widespread influence. Another interesting finding from the survey focused on a potential shift in firms funding this type of research, which could be handicapped on lagging procedural changes.
Upcoming MiFID II laws will allow asset managers to pay for research either by hard payments from their own profits or losses, or through separate client research payment accounts. However this process is lengthy and could take upwards of five years.
European and US asset managers are slated to usher in a round of cuts worth up to $300 million from research budgets due to a shifting regulatory atmosphere in the realm of market investment information.
As market participants and venues gear up for the long awaited passage of MiFID II regulations in January 2018, a number of conflicts of interest have been brought to light between managers and brokers, specifically with regard to the flow of information derived from research studies in the investment space.
Industry Headwinds?
According to a survey that included a total of 99 fund managers and traders conducted by Greenwich Associates, the investment research industry could be primed for a shakeup. The impetus behind this is the European Union’s MiFID II regulations. As such, these rules require asset managers to disaggregate their trading commissions from investment-research Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term, and will likely Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term a negative impact on the amount of commission money that is spent on research and advisory services,
These cuts will not represent dramatic reductions per se at individual asset managers, however the aggregated spending from research providers across the board will equal a more substantial sum, according to a Bloomberg report.
Bloomberg
In particular, the aforementioned survey is equated to a nearly 7 percent decrease in overall commission spend for European institutions and a 5 percent drop for their US counterparts. Moreover, these reductions would contribute to a nearly $200 million decrease in US research commissions spent along with a decrease of more than $106 million in Europe.
The shifting of regulations could dramatically change the existing research playing field with several industry mainstays enjoying widespread influence. Another interesting finding from the survey focused on a potential shift in firms funding this type of research, which could be handicapped on lagging procedural changes.
Upcoming MiFID II laws will allow asset managers to pay for research either by hard payments from their own profits or losses, or through separate client research payment accounts. However this process is lengthy and could take upwards of five years.