North American Asset Managers Increasingly Concerned over Mifid II Impact

Financial research

Unbundling research payments is just one part of the Mifid II regulation that has caused concern among asset managers.

A survey of North American asset managers conducted by New York-based independent broker ITG has highlighted concerns over how the buy-side will adapt to new rules around unbundling of research payments ahead of the upcoming changes under Mifid II.

While Mifid II is a Europe-centric regulation, it will have far-reaching consequences for asset managers with international operations, particularly in the areas of unbundling research payments, as reflected in ITG’s survey.

Despite only 43 percent of respondents believing that the new regulation will have a “direct impact” on their business, 59 percent of those surveyed plan to continue paying for research using commission-sharing arrangements (CSA), while 33 percent expect to use a combination of both CSA and research payment accounts (RPA) for payments, and 8 percent plan to set up a new RPA ahead of the Mifid II start date. Eighty-two percent of those surveyed said that they plan to fully unbundle all of their brokers globally.

Under the upcoming Mifid II rules, asset managers will be required to explicitly separate or unbundle trading commissions from investment research payments. In order to continue paying for research alongside executions, asset managers will be required to set up a RPA.

“Mifid II is going to have a significant impact well beyond the shores of Europe, as institutional investors require asset managers to change the way they budget, fund, price and pay for research,” said Jack Pollina, head of global commission management at ITG, in a statement. “North American firms are anticipating these changes and are taking steps now to adapt to the changing expectations of their end investors.”

The survey polled over 100 buy-side professionals who participated in an ITG webinar on the impact of Mifid II regulations on North American asset managers, with average assets under management of $47 billion.

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