Independent providers struggle in post-Mifid II research landscape
More than six months after the updated directive was implemented, its effects on research provision are becoming clearer. The good news is that buy-side research budgets seem to have stabilized; the bad news is that if you aren’t big, you probably aren’t on the receiving end of them.
As the dust settles from the implementation of second Market in Financial Instruments Directive at the beginning of this year, it is now becoming clear who the winners are likely to be: large global investment banks.
There has been a 19% year-on-year cut in research budgets among the largest European equity investors for 2018, to an average of over $8 million.
The equivalent figure of all institutions is 14%, leaving them an average external research and advisory budget of $3.8 million.
But according to the Greenwich Associates 2018 European Equity Investors Study, the big sell-side firms have increased their share of this shrinking market.
The research polled 69 institutions, 24 of which were deemed to be large investors (on the basis of institutional commission volume).
The expectation prior to the new rules was that the buy side would cut back on services from the largest investment banks. But this is not how it has turned out. Over half of European research and advisory allocation is still targeted at these global investment banks, with 60% coming from the largest asset managers and UK respondents.
The Greenwich study shows that individual budgets allocated to global investment banks are close to double the size of those allocated to mid-size and regional investment banks – though this may partly reflect their far greater range of research products.