Ken Wotton, fund manager at Livingbridge Equity Funds, warns that an unintended consequence could be reduced coverage of smaller quoted companies as asset managers source significantly less research from banks and brokers.
“There are some asset managers who are very reliant on the research produced by sell-side analysts to maintain their knowledge of particular stocks and sectors,” he says. “With less pre-packaged insight and research available going forward, investors considering smaller quoted companies need to consider how best to access potential returns from growth companies, while mitigating the associated risks.”
Other regulatory burdens
Alpha FMC’s Glessing believes while Mifid II has only just landed, firms will soon have their hands full with other areas of regulatory change, such as GDPR and Securities Financing Transactions Regulation.
“Further groundwork will also be required in those areas where FCA consultation is evolving such as the Senior Managers Regime and the Market Study,” he adds. “2018 will be a year of change for the asset management industry and all these deadlines are approaching fast.”
EY’s Nabi names a list of upcoming obstacles for asset management firms to grapple with, including issues around data limitations, as well as forthcoming guidance from ESMA on suitability assessment obligations of investment firms when managing portfolios, and from the FCA on costs and charges.
For now though, it’s all eyes on Mifid II, but for Michael McKee, partner and head of financial services regulation at law firm DLA Piper, it is “more of a whimper than a bang”.
He adds: “While it is one of the most important pieces of EU legislation for securities markets in years, the reality is that on implementation day, 3 January 2018, many member states will not have implemented it and consequently it will still be some time before these major market changes hit home.”
