Since the financial crisis, investing has become increasingly and notably more short term in its outlook. Factors and signals are the new investing elixir, identified and isolated at greater speeds by the advances in technology and trading tools.
Fundamental analysts have tried to adapt by making their information more standardised, more computer-edible, allowing their data to be ever more quickly transformed into zeros and ones and processed by automated trading machines.
In so doing, and with the (unintended) help of regulators still trying to find balance following the crisis, research analysts and research houses have become homogenised, commoditised and less effective. Analysts cover more companies, spend less time with them, understand the sector and its nuances less well….
The buy-side is under pressure too. Machines have aided the argument on fees, and with markets’ never ending (or apparent) ascent, investors continue to press on fees, forcing the big to get bigger, the smaller to close and everyone to cut fees. Alpha is a nice word but falls below returns and fees in most investors’ wish lists.
The buy-side desperately need the sell-side’s research, and the sell-side need the buyside to pay, yet neither is able to break the race to zero.
We think the research department is the greatest mispriced asset in every bank. It should not be a loss leader in the aggregate business model, but a differentiator and high margin product.
There is a huge Upside here. Upside is a technology company formed by the buy-side to evaluate investment ideas. Initially used in-house to measure portfolio managers their ideas and success, it has now been spun-out into its own entity.
By taking investment banks’ research, we are able to score the analyst, rank them versus their peers, provide ‘nudges’ to help them improve and finally, determine a value for their research in pounds and pence. We believe this tool will allow investment banks to establish a pricing framework for MIFID.
We believe it will allow research analysts to improve, and the buy-side to have a quantifiable way of measuring them before meeting and consuming their ideas.
Finally, we believe it is a way for banks and brokers to promote talent.
We take written and numerical data from the investment banks and using our analysis framework and AI, measure the probability of success of those ideas.
Based upon the analysis and learnings of tens of thousands of securities across global markets over a decade, we bring you the Upside for Research Houses everywhere.