Eight months after the U.K.’s Markets in Financial Institutions Directive went into effect, firms are adjusting to the requirements to unbundle research costs from trade execution fees. A report in the Financial Times says some fund managers have cut back on the analyst research they receive from firms and smaller brokerages in the U.K. are thus taking hits to their bottom line. Smaller brokers are also finding it more difficult to obtain equity trading business that in the past would have been bundled with providing research. According to a report in Pensions & Investments, some large asset managers are paying research costs themselves. For example, Janus Henderson Group PLC reported a $19 million estimated MiFID II research cost for 2018 and Man Group reported it would see unspecified “cost increases from MiFID II.” The P&I report also noted that for some money managers, the regulatory transition has been relatively smooth but concerns about access to research, appropriate information sharing, and steeper research costs are causing other managers to overhaul the way they work with research providers or to improve their own research capabilities.
