How MiFID II research changes will affect small-cap funds

Under-researched area

Small-cap fund managers have spoken out how changes to research payments will have "unintended consequences" for the small-cap sector under MiFID II.

Under the regulation, which comes into force on 3 January 2018, the costs of research are required to be clearly identifiable when charged to clients, although most asset managers have chosen to absorb the costs themselves. Firms including Allianz Global Investors, JO Hambro Capital Managment, T. Rowe Price and M&G Investments have all said they will absorb research costs.  The small-cap sector is already relatively under-researched compared to its large-cap peers and it is expected this coverage will fall further from January as fewer companies are willing to pay for research and res...