US asset managers are increasing their lead over European peers on investment research spending, as regulatory differences continue to constrain UK and EU firms, according to new data from Substantive Research.
The firm’s latest survey shows that US research budgets have recovered more strongly since 2022, while European spending has barely rebounded following cuts triggered by MiFID II.
On average, US research budgets have risen by 40 basis points since 2022, compared with just 2 basis points in Europe. Among firms with more than $150bn (€140bn) in assets under management, US managers now spend $8.6m (€8m) more annually than their UK and EU counterparts. In some cases, budgets are up to five times higher for firms of similar size and strategy.
Globally, research budgets increased by around 1% in 2025, with growth driven entirely by US firms.
“The pace of reduction in research budgets across Europe and America was similar from 2018 to 2022, pointing to the fact that whilst MiFID II may have been a catalyst globally, the downward trend had fundamental industry drivers behind it as well,” Mike Carrodus, chief executive officer at Substantive Research, told IPE.
“What’s evident, however, from the last three years is that US firms have become more flexible and increased their spending, albeit to levels that are still well below previous highs. They are unlocking access to more research within existing relationships and also new providers,” he added.
Carrodus said: “The difference in research regulations has clearly prevented many UK and EU-based asset managers following suit – there’s always been a structural spread between American and European research budgets, but now it’s widening further as US firms respond to evolving needs from their investment functions.”
The divergence comes as European asset managers consider a return to funding research through commission sharing agreements (CSAs), following recent regulatory changes aimed at easing MiFID II rules.
Adoption has so far been slow, with firms cautious about passing research costs back to asset owners.
“So far we haven’t heard many concerns, but that may be a function of not many asset managers having tested the waters yet,” Carrodus said. “For this to accelerate, buy side firms will have to have conviction that they are part of a wider industry move, hence the stuttering start to this process.”
He noted that cost pressures and competitiveness concerns could accelerate uptake. “But the cost outlook for asset managers, added to a continuing concern about global competitiveness, will mean that the tipping point will be reached over the next few months.”
The survey also points to a concentration of spending, with 55% of research budgets allocated to firms’ top 10 providers and 24% to the top three. Spending on independent research providers has risen by 29% since 2022, but still represents just 9% of total budgets.
While the data does not directly link higher spending to better investment performance, Carrodus said asset managers increasingly see research as a cost-effective driver of returns.
“We don’t track alpha generation, but this question obviously gets to the core issue,” he said.
“Our response would be that the large reductions in research spending levels since 2018 have made asset managers much more confident about the cost/benefit calculation for their asset owner clients. They feel that the leverage that differentiated research can provide for beneficial investment outcomes, far outweighs the now reduced cost implications.”
Substantive Research surveyed 50 large asset managers globally, representing $20trn in assets.
