LONDON (Reuters) - European asset managers could cut their research budgets by more than 100 million euros a year after a major regulatory overhaul of the securities trading industry goes into effect next January, a survey by Greenwich Associates found.
The new rules, known as Markets in Financial Instruments Directive, or MiFID II, aim to make European securities markets more transparent. One key aspect is that investment banks must charge fund managers an explicit fee for research rather than bundling the cost into trading commissions charged to clients, as at present.
Greenwich Associates, a U.S. based financial markets consultancy, said nearly 40 percent of asset managers it surveyed expect a big fall in research spending on research from about 1.58 billion euros ($1.68 billion) a year at present.
To comply with the new rules, large European and global asset managers with operations in the region are increasingly “unbundling” or separating trading costs from research costs when they pay brokers, Greenwich said.
Jupiter Fund Management said last month it would stop charging clients for research it buys from banks, joining Woodford Investment Management, M&G and Baillie Gifford who have already announced similar measures.
Changes in the way fund managers pay for and consume research has raised concerns about staffing levels across analyst teams at large investment banks and has given independent research firms a fillip.
The Greenwich survey also found numerous U.S. asset managers with significant business in Britain and Europe are choosing to adopt MiFID-II practices to simplify research spending across their businesses, even though regulations do not require it.
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Reporting by Vikram Subhedar; Editing by Catherine Evans