Mid and Small-Cap Investor Survey 2019: MiFID II - The Search for Research

The QCA/Peel Hunt Mid and Small-Cap Investor Survey brings together the views of 102 UK-based fund managers and 105 small and midsized quoted companies and was undertaken between October to December 2018.

Read the full report here (pdf)

MiFID II: It’s getting worse
Generally, feelings about the impact of MiFID II appear to have worsened since last year. The majority of the investor community have seen their list of research providers decrease over the past 12 months, and only expect further reductions in the future.

Fund managers also expect this to lead to a decrease in the number of broking houses in both the short and the long-run. Indeed, access to research providers has decreased for many investors, as has contact with brokers, analysts and sales representatives. In the previous survey, around half of respondents noticed a drop in the volume of research on mid and small-caps being provided; this year nearly two-thirds said the same.

The first annual reviews of broker research quality and performance following MiFID II’s implementation will lead to many difficult discussions between the providers and recipients.

The message seems to be that brokers and investors need to be very clear about what value they are offering and receiving. It is very important that the corporate clients feel confident that their story is being imparted effectively by their broker and heard by the key investors. The impact of MiFID II is causing everyone to consider how they play their role.
The expected fall in the number of broking houses suggests an expectation that some will fulfil their role better than others. Ultimately, corporate clients will vote with their feet and investors will vote with their research budgets.

Key findings

1.    62% of investors report that there is less research being produced on small and mid-caps since MiFID II came into effect.
2.    86% of investors expect there to be fewer broking houses in the next 12 months as a result of MiFID II.
3.    Companies are taking action – 90% say they either have, or plan to, develop their corporate website to improve visibility to investors. Investors say that holding a capital markets day is the best way to improve visibility.
Read the full report here (pdf)