Mifid II is shifting the burden of research costs from the investor to the investment manager, tightening managers' budgets by 20%.
The “Big Bang” nature of the reform may be painful. But it remains a big improvement on the old regime. Pointless research had real costs, loading charges on to investors that they found hard to identify, let alone control. Railpen, a £20bn UK pension scheme, took several months simply to work out that its headline fees were about a fifth of the true cost of its asset management. These hidden expenses weigh heavily on long-term returns.