Buy-side will move increasingly to client-funded research in 2026, report reveals

Following the introduction of the FCA’s new joint payments rules in May 2025, allowing payments for third-party research to be bundled and relaxing Mifid II restrictions, the buy-side appears to be moving increasingly back to client-funded research.

Almost three quarters (73%) of European asset managers surveyed stated that they felt at a competitive disadvantage to their US counterparts, found a recent report by Substantive Research.

Specifically, these disadvantages referred to the research European asset managers can access in the current profit and loss (P&L) funding environment, as well as the ability to meet with the corporates they need to meet with to make investment decisions.

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Assessing these findings, the survey indicated that in Q2 2026, firms will increasingly shift back to client-funded research budgets, with 59% of the study’s respondents highlighting that by adopting a joint payments approach, asset managers could gain greater investment flexibility for future developments in the research space.

Currently, the average medium size asset manager in the UK or EU spends $700,000 less each year on technology-driven research tooling and analytics than those in the US, indicating that opportunities to access more research flexibility and developments could have a significant impact on European firms.

Speaking to The TRADE, Mike Carrodus, chief executive of Substantive Research, said: “As some of the largest buy side firms created working groups this spring to review their options, spurred on by the resolution of some outstanding regulatory issues, they became increasingly convinced that moving back to CSAs was aligned with their end investor clients’ best interests. Mifid II has done its job – these costs are materially lower than they were when they were last passed onto investors pre-2018, so any impact to performance should dwarf the added cost.”

In addition, performance was emphasised as a key priority for asset managers in the survey, with 80% saying that “if budgets increase slightly but have a leveraged effect on performance, then asset owners reap the rewards.”

Carrodus added: “It’s clear that 2026/27 is going to be an investing climate that requires careful navigation. In tough times it’s tempting to cut research budgets from a cost perspective at exactly the time when asset managers need the best insights available to them. This move to joint payments would ring fence research from that dynamic.”

These latest findings also build on an earlier survey, released in July, which revealed that 87% of buy-side respondents predicted that at least half of all research budgets will become client-funded within the next two years.

Substantive Research’s Buy-Side Survey included responses from 40 of ‘the largest asset managers,’ with a combined AUM of $15 trillion – 25% North American, 25% EU-based and 50% from the UK.

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