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Montanaro to cut out ‘noisy’ external research in Mifid II call

Montanaro to cut out ‘noisy’ external research in Mifid II call

While a number of asset managers are announcing that they will absorb the costs of third party research, Charles Montanaro’s boutique has revealed it will not buy any research at all.

Montanaro Asset Management has said it will not pass on the cost of external research onto clients when Mifid II is implemented next year, nor will it absorb it.

Instead, the firm said that from January 2018 it will stop receiving research from brokers, describing much of it as ‘little more than noise’ to long-term investors.

A spokesperson for Montanaro said: ‘With 10 in-house analysts currently, we have one of the largest investment teams dedicated to researching and investing in European and UK small and mid cap stocks.

‘This means that we have the resources to do our own proprietary research.’

The spokesperson said the firm sees Mifid II as an opportunity, adding: ‘We expect our small cap markets to become even less efficient.

‘The ever growing contingent of large asset managers who have announced they will pay for research out of their own pocket – but will pay far less overall – will put the sell-side under intense revenue pressure next year. 

‘It is likely several brokers will stop producing small cap research altogether or at the very least reduce the amount of research they publish.’

Montanaro said with its team of 10 analysts it does not expect to incur any additional research costs next year.

The company added that it will be able to strengthen its own research team with ‘talented analysts who are let go’.

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