Until December 2017, reams and reams of sell-side investment research was sent to the buy-side, with asset managers sending both trading business, and paying commission to the sell-side who created it.
The introduction of MiFID II in early 2018 ended this interconnectedness, which has undoubtedly improved clarity between research and execution costs. But what impact has this had on research teams, and how do they now value or quantify the research being produced?
It was confirmed by the CFA Institute in early 2019 that almost 60% of asset managers were taking less research from banks than before MiFID II, research budgets across the board had been scaled back, and the price they were willing to pay had also dropped. Nearly two years on, the impact is still being felt.
An FCA study has also suggested that since MiFID II’s introduction, there has been a wide variation in how firms evaluate and decide payment for research, with too much focus from asset managers on measuring quantity using a fixed rate card with prices based on volume.
How do research teams then know the quality of their work, both together and individually? How can you rank analysts, promoting those who will be the thought leaders of tomorrow?
There is an Upside.
We have developed a technology that means Heads of Research can not only place a value on their research, measuring their teams against research teams internally, but also peer to peer and externally.
Using a team’s research both current and historical, we produce reports using automated insight, enabling research houses to promote from within, and recognise talent. It can put a value on your team’s output, meaning you can ensure that you can charge asset managers the right amount.
There’s a science to being right, and it’s here.