- 'Overwhelming' majority of European firms moving to CSA-funded research budgets
- 87% of respondents predict that at least half of all research budgets will become client-funded within the next two years
- 83% said that new FCA rules will create an opportunity for regulatory alignment between the US/EU/UK (vs. 45% previously)
London, 11 July 2025: Substantive Research, the research and market data discovery and spend analytics provider, today releases the results of a survey of the largest asset management firms’ reactions to the latest FCA Policy Statement on investment research unbundling and the new “joint payments” freedoms.
Background - FCA's efforts to stimulate the research market post-MiFID II
In July 2024 the FCA released new rules within COBS2 covering segregated mandates, making it easier for asset managers to pass their external research costs back onto end investors, as they did pre-MiFID II. However, it became clear that for this “joint payments” option to be broadly taken up in the UK, any new freedoms would need to be extended to include pooled funds. In November 2024 the FCA Consultation Paper (CP24/21) covering Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Fund Managers Directive (AIFMD) markets, clashed with the previous COBS2 rules by requiring research budgeting at a fund level, which as Substantive’s January survey showed, would have been a ‘dealbreaker’ for many firms.
Asset managers have now had eight weeks to digest the FCA’s final Policy Statement (CP24/9) that shows that the FCA has listened to the buy side’s concerns, and allowed for both strategy or firm-level budgeting for research.
Substantive Research’s latest survey shows clearly how the asset management community will respond to this optionality.
- 87% of respondents predict that at least half of all research budgets will become client-funded within the next two years
- 52% said that within two years the majority of research budgets would move to client-funded (vs. 7% previously), with another 35% expecting half of budgets to have moved by then
- 71% of respondents were supportive of the new joint payments freedoms (vs. 16% supportive in the previous survey in January)
- 97% of respondents said that the new requirements were workable (vs. 40% previously)
- 94% of respondents said that the separate EU requirements (similar to the FCA’s but less onerous) were workable (vs. 74% previously)
- Finally, 83% said that the new rules will create an opportunity for regulatory alignment between the US/EU/UK (vs. 45% previously)
Mike Carrodus, CEO of Substantive Research said: “87% of respondents are now saying that within two years, either the majority or half of budgets in Europe will be client-funded, which is an enormous shift. Asset managers increasingly perceive that the benefits to their investment process and cost structures now far outweigh any previous barriers to change. While concerns remain regarding the fair treatment of clients (TCF, as defined by the FCA), higher comfort levels from global firms with experience of CSA models in other regions, are feeding through to the domestic players.”
He added: “The removal of requirements around fund-level research budgeting has been transformational to sentiment on the buy side. Coupled with renewed determination from global firms to benefit from a single global research process, it is now clear that CSA-funded research will be ‘the new norm’ by the end of 2026.”
Universe of firms covered by the research:
- 40 of the largest asset managers surveyed
- AUM: $13 Trillion
- Geographic split: 20% N. America, 20% EU, 60% UK
About Substantive Research
Substantive Research provides independent comparison and discovery on investment research, ESG and market data pricing and products, to financial institutions that represent a combined AUM of more than $20 trillion and total assets of over $25 trillion.
Via the Substantive Research platform, investment research consumers can compare their provider pricing, budget allocations and benchmark consumption habits versus their peers, to optimise their overall research spend.
In response to demand from its customer base, Substantive Research subsequently created the industry’s first “apples-to-apples” Market Data Spend Analytics Service, which allows both buy-side and sell-side firms to truly understand and compare their market data payments and budgeting against peers and the wider market. This has become an important tool for clients against a backdrop of ongoing pricing opacity in the industry and rising market data costs.
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