Buy-side bearish on unbundling post-MiFID II

Global survey of fund managers suggests the buy-side is now feeling the consequences of MiFID II unbundling rules.  

Asset managers are generally negative about the effects of unbundling requirements under MiFID II, according to a new survey from RSRCHXchange.

A poll of 418 fund managers globally, representing more than $30 trillion in assets under management, found that over 80% of respondents outside of Europe believe unbundling is a bad thing for brokers, while 66% agree it is also a bad thing for asset managers. However, over half of buy-siders recognised that unbundling does have a positive impact for end investors.

The survey highlights concerns around pricing and access to research in the post-MiFID II environment, with 43% of fund managers in Europe describing access to research providers as reduced or worse off. Similarly, a majority of 75% of buy-siders felt that the low prices charged by providers at this point in time are not sustainable.

Pricing and access to research have been key concerns for asset managers leading up to and under the MiFID II unbundling rules, which mean that the buy-side is no longer able to receive research paid for through execution commissions.

RSRCHXchange’s survey also revealed that unbundling will likely go global over the next few years, with 83% of respondents in the US stating unbundling will take effect within the next four years, and 53% of respondents in Asia expect it to take effect within two years.

Commenting on the survey’s results, co-found of RSRCHXchange Vicky Sanders, explained that the survey was conducted just months after MiFID II came into effect, which saw the biggest change to the research space in recent decades.

“It’s clear that its impact has already been felt in this short time but that there is more the industry needs to do to adhere to the rules and adapt to these changes,” she said. “If the current price of research is not sustainable, what will happen next to help the industry find equilibrium?

The survey concluded that overall there is a lot of anger, particularly amongst front office respondents, and for many in Europe adhering to unbundling requirements has been far more than a moderate change.

“A lot of power and choice has been removed from the front office and it is clear that there is some confusion around access to analysts and budgets. However, we are only a few months in and much of this is to be expected as things wash through and we get through the first year,” the report said.