Buy-Side Research Budgets Continue to Shrink Despite Rebundling Potential


According to a recent study conducted by Substantive Research, a UK-based research discovery and research spend analytics provider, asset managers’ average research budgets have continued to shrink in 2023, reflecting a focus on the value and cost provided by their research suppliers given challenging market dynamics for active managers.

Key Survey Results

The headline result from Substantive Research’s latest industry survey shows that asset manager’s research budgets fell 6.5% in 2023, indicating continued financial pressure as assets under management for active equity managers has fallen by even more during the year.

The three brokers who are expected to be paid the most by the buy-side in 2023 remains unchanged from Substantive Research’s prior survey conducted in May, as JP Morgan, Morgan Stanley and Jefferies took the top three spots, respectively.

Increased concentration is one of the key trends evident from the most recent Substantive Research survey.  Payments to the top ten brokers in the average research budget increased to 54.6%, from 53.9% in 2022 (and up from 52% in 2019).  This trend was also seen from asset manager’s usage of sell-side interactions (meetings and calls) with analysts.  The percentage of interactions consumed from the top ten brokers increased very slightly from 52.5% in 2022 to 52.6% in 2023.

In addition, Substantive Research found that asset managers’ broker lists were also showing signs of consolidation as M&A activity within the research industry is having an impact on reducing the size of asset managers’ pool of providers.

Substantive Research also discovered that the merger of two research providers has a definite impact on the price asset managers pay for the acquired providers’ research.  According to survey participants, the price of acquired sell-side brokers’ research decreases 6% on average 12 months after acquisition.  It is interesting to note that the impact of an acquisition on the price of independent research providers’ research only decreases 1.8% on average 12 months after acquisition.

Mike Carrodus, CEO of Substantive Research, said of this survey “If asset managers could take the costs of external research off their own P&Ls without perceiving any adverse consequences, they would probably do so, which could in turn remove any downward pressure on these budgets. But the ability to rebundle trading and research will fundamentally depend on commercial dynamics, not regulatory ones, and it remains to be seen whether the appetite exists amongst the buy side to open this conversation up with clients in the current tough market environment.” 

Our Take

The results from Substantive Research’s most recent buy-side survey were interesting as they revealed that the institutional investment research industry continues to shrink in the wake of MiFID II and the move by many asset managers to paying for research from their own pockets. 

However, this should not be seen as they only factor which has led to reduced spending on investment research.  One of the other key drivers of declining research budgets in recent years has been the fact that investors have continued to shift their assets from actively managed funds to passive management, where investment research is irrelevant.  Below is a chart using data from EPFR showing that on a global basis, assets in passive equity funds are shortly set to eclipse assets in actively managed funds.  As this trend continues, spending on sell-side and independent research is likely to continue to shrink.

Of course, the big question is whether “rebundling” or a relaxation of MiFID II rules mandating the unbundling of research payments for commissions, can prompt a turnaround in the moribund global investment research industry?  Clearly, the answer is “maybe”.  It will depend on exactly how the EU and FCA decide to change the existing MiFID II rules around research unbundling. 

However, ultimately asset owners will decide whether they will accept their asset managers using commissions once again to pay for some or all of their research budgets – a move that will come out of their own pockets.  This decision will likely be driven by asset owners’ assessment of whether “rebundling” will result in a real and sustainable gain in fund performance.  Without this conviction, asset managers will be stuck continuing to foot the bill for their sell-side and independent research providers.

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About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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