The Unbundling of Mutual Funds’ Trading and Research Commissions: Have Investors Benefited?

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 this rule in Sweden already in 2016 to provide early evidence on the implications for fund investors. Using a diff-in-diff framework and mostly hand-collected data on bundled and unbundled commissions, we find basically no impact of the regulation on fund investors: neither total expense ratios nor fund performance changed in response to the unbundling. We also fail to document any information gains for investors’ fund selection process from the increased transparency of observing execution and research costs separately. Overall, we are skeptical that the unbundling of commissions has had any positive impact on fund investors.