Hedge funds are pouring money into small and mid-sized European companies to take advantage of new regulations that they believe will reduce the available information about these firms — and create investing opportunities.

The European Union’s revised Markets in Financial Instruments Directive, or Mifid II, requires asset managers to pay separately for research for the first time, forcing banks to split the cost of research and trading execution. The regulation is expected to significantly reduce the amount of research consumed by fund managers.