Many asset managers are set to re-examine their sources of research as new regulations kick in, research suggests.

An Electronic Research Interchange survey found 74% saying they were likely to overhaul sources of research and apply greater scrutiny from January 2018 under MiFID II.

One year out, 38% were not confident of being prepared for MiFID II unbundling and 42% were not confident of their obligations.

Some 74% of asset managers said they forsee a reduction in investment bank research and 38% were considering expanding internal research teams.

A quarter of respondents believed that research spending would increase, while the remaining 75% predict that spending will either remain the same or even fall.

The survey found that both the buy and sell-side anticipate the need to adapt to a world in which research fees are transparently reported and unbundled from trade execution fees.

However, the questions of how their businesses will be affected, and how they will adapt, remain unanswered with just under a year to go until MiFID II implementation on 3 January 2018.

Respondents broadly agreed that the aims of MiFID II unbundling rules were virtuous. Over 7 in 10 (74%) believed that the buy-side should bear the cost of research.

Only 40% of managers expected that greater research fee transparency would provide a demonstrable benefit for clients.

Chris Turnbull, co-founder of ERIC, said: “MiFID II will significantly change the investment industry but the consumption of quality research will remain a critically important element of the investment process.

“Our findings show that asset managers expect that relationships across the industry will be deeply affected under the new regulatory regime. While we believe that investment banks will continue to play a critical role in the provision of quality research, it is clear than both the buy and sell side must adapt to new research procurement and distribution strategies in order to avoid getting caught out in January 2018 and continue serving the best interests of the end investor.

“MiFID II has kick-started a drive for transparency that will recognise the value of high quality research, but there is still significant work to be done to meet regulatory obligations and ensure the investment research market functions effectively in an unbundled world.”