Mifid research rules could hit asset manager profits 29%


European asset managers operating profits could decline 17 to 29 per cent because of research unbundling required under Mifid II, analysis by S&P Global has found.

Crisil, an S&P company, believes most large European asset managers will absorb research costs, rather than adopting research payment accounts, which it describes as a “strenuous” process.

The cost of RPAs can be borne by investors but involves additional disclosure, budgeting, reporting and auditing.

The analysis anticipates a 17 per cent hit to operating profits for an asset manager with 35 per cent exposure to equities and with 80 per cent of equity costs absorbed by the firm, while 20 per cent is borne by brokers.

However, in asset managers where 40 per cent of assets are in equities and all research costs are born by them profits could take a 29 per cent hit.

The report predicts a 9 to 16 per cent hit to profits for US managers with funds in Europe. It predicts that as investors benefit from lower costs in Europe, the US regulator will implement unbundling.