Do investors benefit from MiFID II unbundling?

Abstract

The MiFID II regulation led to the unbundling of research and execution costs in Europe starting in 2018. We exploit the early adoption of an unbundling rule in Sweden in 2016 to provide evidence on the implications of unbundling for fund investors. Using a difference-in-differences framework and 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, we find that fund costs of more active funds increased in relative terms. Finally, we do not find evidence that the increased transparency of observing execution and research costs led to improved fund performance or information gains for investors’ fund selection process. Overall, our results suggest that investors did not significantly benefit from the unbundling of commissions.