• The average research budget has decreased a further 6.5% 
  • Payments to the top ten brokers in the average research budget increased to 54.6%, from 53.9% in 2022
  • Impact of M&A – Acquired brokers’ pricing decreases 6% on average, 12 months after acquisition

London, 21 September 2023: Substantive Research, the research discovery and research spend analytics provider for the buy side, today published headline conclusions on the current state of broker research pricing, supply and market share. 


The UK’s Investment Research Review has inspired hopes that “rebundling” of research and execution next year could reverse the post-MiFID II decline in research budgets, and encourage greater coverage of small and medium-sized enterprises (SMEs). 

The hope is that asset managers can go back to passing research costs onto their end investor clients, and that the amount of money that is spent on external research on SMEs and other asset classes will increase in volume and quality as a result.

Substantive Research latest findings

Substantive Research’s latest buy side survey shows that in 2023 asset managers are continuing to focus on value and cost when it comes to research budgeting. This is leading them to consume even more from their core bulge bracket providers and continue to reduce research budgets in a challenging market environment for active managers.  

For 2023 research budgets, so far:

  1. The average research budget has decreased by 6.5% (but actually grew in proportion to AUM, as AUMs decreased faster than research budgets). 
  1. Payments to the top ten brokers in the average research budget increased to 54.6%, from 53.9% in 2022 (and from 52% in 2019). 
  1. Interactions (meetings and calls) that fund managers take with analysts are also concentrated, with the percentage of interactions consumed from the top ten brokers increasing very slightly from 52.5% to 52.6%. 
  1. The top three brokers in the top ten remain unchanged from Substantive Research’s previous update in May – JP Morgan and Morgan Stanley maintain the top two positions with Jefferies in third.

The much anticipated consolidation amongst providers further down the list of brokers is now happening, and there have been various high profile examples in the last few months. Substantive Research expects more M&A amongst research providers in 2024, but its data shows that those that do take the option of seeking shelter within a larger umbrella of products and services will need to be realistic about their pricing power, post-acquisition. 

Impact of M&A on research pricing

When Substantive Research analysed M&A in the research market since MiFID II, it became clear that pricing power is weakened a year after the M&A event, particularly for brokers:

  1. Acquired brokers pricing decreases 6% on average, 12 months after acquisition
  1. However acquired independent research providers’ pricing only decreases 1.8%, 12 months after acquisition, on average

Mike Carrodus, CEO of Substantive Research, said: “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.” 

What will happen next

The market will now focus on the FCA to see when the consultation document for the proposed changes will be published.  With so many firms waiting to see the detail before even considering whether these freedoms are practicable, this autumn may have the buy and sell side negotiating pricing and access from a very different set of expectations. 

Mike Carrodus, CEO of Substantive Research, added: “Brokers encouraged by imminent regulatory changes may be surprised at how tough negotiations are this autumn – asset managers aren’t changing processes until they get much more clarity, and in the meantime budgets are once again under pressure.”

Universe of survey data:

40 asset management firms, 60%/40% Headquartered Europe/North America, Total AUM represented $12tr+, 70%/30% Long-only/Hedge Fund.