Do Investors Benefit From MiFID II Unbundling?

Abstract

One prominent aspect of the MiFID II regulation that became effective in Europe in 2018 is the unbundling of research and execution costs. We exploit the early adoption of an unbundling rule in Sweden already in 2016 to provide evidence on the implications for fund investors. Using a difference-in-difference framework and mostly hand-collected data on bundled and unbundled commissions, we find no economically meaningful effect of unbundling on commissions. When we split the sample into more active and less active funds, using the Active Share measure, we find that fund costs of more active funds increased in relative terms. Finally, we fail to identify improved fund performance or any information gains for investors’ fund selection process from the increased transparency of observing execution and research costs separately. Overall, we are skeptical that investors benefited from the unbundling of commissions.

Keywords: Financial Intermediation, Mutual Funds, MiFID II, Unbundling

JEL Classification: G11, G23