NEW YORK and LONDON, April 17, 2017 (GLOBE NEWSWIRE) -- The reallocation of assets from active, fundamentally-based investment strategies to passive/ETF index-based products has the industry on edge. Over the past ten years almost $3 trillion has moved from discretionary stock-picking funds to index-aligned investment strategies. In addition, as the European Union regulators look to implement MiFID 2 unbundling regulation in January 2018, it is becoming increasingly apparent that US investors will be dragged into complying with rules on how they obtain, value, and pay for investment research. TABB Group’s latest research US Institutional Equity Trading Study 2017: In the Eye of the Storm shows how unprepared the US institutional investor community is for either of these challenges.
The Interview-Based Study (IBS) of 95 head and senior traders of US equity asset managers and hedge funds determined that over 95% of US equity funds have been impacted by investors’ move from actively managed funds to passive strategies. The data shows a considerable number of managers both large and small do not have a strategy to counter this trend. Responses to the shift vary greatly, ranging from just hoping this trend changes (35% of total response) to working to reduce their cost structure (11%) with everything in-between.
As the threat of passive investing hits fundamental institutional investors head on, US active managers are also increasingly being dragged into the new European rules that force funds to restructure the way they obtain investment ideas and procure research with 76% of US managers expecting to be impacted by the MiFID 2 unbundling rules up from 66% a year ago.
“Virtually all larger funds will need to restructure the way they procure research,” said TABB Group analyst and co-author Valerie Bogard. “Larger funds are more impacted and more prepared than smaller funds. Many smaller funds have not even started analyzing the impact of unbundling on their business. The combination of the move toward passive investing, unbundling, and low volatility has the US equity institutional investor commission pool down 7.5% from 2015.”
US Institutional Equity Trading 2017: In the Eye of the Storm documents the rise of passive investing, impacts of MiFID 2 on US investors, the buy-side’s top initiatives, calculating the value of the broker relationship, impact on brokers and exchanges, and institutional investors views on market structure change. The comprehensive 43 page report with 44 exhibits is now available for download by TABB equities clients at https://research.tabbgroup.com/search/grid.
For more information or to purchase the report, contact info@tabbgroup.com.
About TABB Group
TABB Group is the international research and consulting firm focused exclusively on capital markets. For 14 years, TABB Group has been helping business leaders gain a truer understanding of financial markets issues to develop actionable roadmaps and approaches to future growth. By accurately assessing their customer base, competition, and key market opportunities, TABB Group works with senior industry leaders to make critical decisions about their business. For more information, visit www.tabbgroup.com.