The QCA/Peel Hunt Mid & Small Cap Investor Survey 2018 brings together the views of 100 UK-based fund managers with a small and mid-size company focus.
The results indicate that MiFID II, which came into effect at the start of this year, is resulting in a decrease in both the volume and quality of research into small and mid-size companies.
The majority of fund managers believe that MIFID II will negatively impact the liquidity of mid and small-cap companies and it is also expected to lead to a decrease in the number of broking houses.
Key findings of the survey:
- Nearly two-thirds (63%) of fund managers see the overall impact of MIFID II to be negative.
- 70% think MIFID II will result in less research being produced on small and mid-cap companies in the future, and nearly half (48%) already see less research being produced in these companies.
- 45% think that MIFID II will result in lower quality research on small and mid-cap companies.
- 74% believe that MIFID II will directly lead to corporate websites becoming more important sources of information for investors
- 54% believe that MIFID II will negatively impact liquidity in small and mid-size companies. Only 16% think this will be positive.
What do the results mean for companies?
MiFID II is proving to be the single most impactful change on the public markets for the last 10 years.
For small and mid-size quoted companies, important points to note are:
- Your website is going to become a more important source of information for investors – the impact from MIFID II on the availability of small and mid-cap research means that investors will increasingly look to corporate websites for information
- You need to know if your broker is able to distribute research about your company to investors and potential investors – Asset managers previously received research ‘free’, with the cost built into trading fees paid for by fund managers’ clients. Now, under MIFID II, fund managers must pay for research and trading costs, reducing demand for services traditionally offered by institutional [and corporate] stockbrokers.