Neil Henry
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Asset managers now able to track and benchmark analyst moves, seniority and coverage for relevant sectors
London 23 November 2020: Substantive Research, the research discovery and research spend analytics provider for the buy-side, has today launched its Analyst Mapping service, allowing asset managers to gain an aggregated view of banks’ analyst moves, their seniority and sector coverage of relevance to them. Managers can now understand which brokers are investing or disinvesting in experienced analysts covering the sectors and asset classes pertinent to their strategies and allocate their research budgets more efficiently, to ensure the quality of research is maintained.
The changes in the provision and consumption of research following MiFID II unbundling requirements coupled with the move to virtual engagements in response to COVID-19 has presented asset managers with a number of challenges. They have to ensure that their investment professionals receive the quality research they need, at an appropriate valuation. Furthermore, brokers are continuously making changes across their analyst teams as they concentrate on their comparative advantages and areas of greatest leverage.
By launching its Analyst Mapping service, Substantive Research gives buy-side firms access to centralised data to track analyst moves, providing them with crucial context for the evaluation and benchmarking of their payments to research providers. This helps managers optimise their research spend and better manage their broker relationships, whilst recognising where their providers are investing.
What’s more, firms can recognise new areas of quality and coverage inside and outside their existing broker list. This is particularly important post MIFID II, as they are no longer allowed to read research they haven’t paid for.
Mike Carrodus, CEO of Substantive Research, said: “The global research market shows no sign of convergence yet. Europe remains committed to unbundling, with asset managers paying for research from their own P&L, but considering a softening of the rules for research on SMEs and fixed income; at the same time, the US continues to pass research costs to their client base. However, it is clear that both sides are working with capped budgets, meaning they are allocating carefully and transparently.â€
He added: “Our Analyst Mapping tool will enable asset managers to have an aggregate view over analyst moves across the market, evaluate where banks invest or disinvest, benchmark sector expertise gains and losses broker by broker, and ultimately decide how to allocate their research spend in relation to the areas and asset classes relevant to them.â€
The Analyst Mapping service is delivered as a realtime Dashboard, breaking down relevant data by country, sector and individual brokers; multiple disparate data sources are cleaned, standardised and checked for gaps to ensure accuracy and enable a holistic view.
Key developments in analyst moves since MiFID II came into force include:
In proportionate terms, since MiFID II came into effect European brokers have shrunk their analyst teams at least three times more than their US counterparts. We have seen a 12% loss of analysts in Europe vs a 4% loss in the US.
For both Europe and the US the majority of analyst losses took place in 2018 and 2019; increases in 2020 YTD do not outweigh the previous losses.
Of the analysts lost by US banks from 2018-2020, 61% covered US markets, equating to 172 individuals. Of the analysts gained over the same period of time, 16.3% (equivalent to 46 individuals) are in the UK. In other words, US banks have shrunk their local teams but continued to invest in their international presence, increasing the number of analysts in the UK [who also cover Europe from the UK] and Asia, to cater to customer demand for research coverage outside the US
Of the analysts lost by European Banks from 2018-2020, 66% covered the US; this equates to 121 individuals. However, European banks increased their UK analyst teams by 8.2% over the same period of time, equivalent to 15 individuals. This means European banks have consolidated back to their core markets, providing pan-European research coverage from the UK and withdrawing from the US.
From 2018-2020, US brokers in aggregate have grown their analyst teams covering Financials (+6%) and Real Estate (+10%), and shrunk in the other sectors, with Energy (-23%) and Industrials (-21%) being hardest hit.
In 2020 alone, US banks have increased their analyst teams across 6 sectors, with highest gains across Financials (+18%), IT and Real Estate (with 9% each)
In Europe, brokers have shrunk their teams across all sectors between 2018 and 2020, with Energy and Healthcare being hardest hit, with an 18% loss of analysts in each area
In Europe, in 2020 alone, the downward trend continues with Healthcare shrinking 14%, Financials and Energy each losing 7% of their analyst teams and IT being the exception, showing a slight increase of 2%.
The Analyst Mapping dashboard has already been rolled out to 35-40 clients and will be complete to all Substantive Research clients by the end of the year. Additional areas of functionality will be added to the dashboard over time, driven by user requests for more granular insights into the research and analyst sectors.
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Neil Henry
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Substantive Research analyst mapping study examines the juniorisation of analyst research across the US and Europe
London, 8 March 2021: Substantive Research, the research discovery and research spend analytics provider for the buy-side, today published findings of its latest study analysing the juniorisation of analyst research, which began with the implementation of MiFID II in January 2018. The analyst mapping exercise provides evidence that the research market globally has lost over 7,500 years (net) of analyst experience in the last three years.
The study was carried out using Substantive Research’s Analyst Mapping tool, which allows asset managers to gain an aggregated view of banks’ analyst moves, their seniority and sector coverage of relevance to them. Managers can clearly see which brokers are investing or disinvesting in experienced analysts covering the sectors and asset classes pertinent to their strategies and allocate their research budgets more efficiently, to ensure the quality of research is maintained.
In its first analyst mapping report published in November 2020, Substantive Research found that since MiFID II came into effect, in proportionate terms, European brokers have shrunk their analyst teams at least three times more than their US counterparts. There has been a 12% loss of analysts in Europe vs a 4% loss in the US, as buyside budgets and research pricing have decreased globally but more significantly in Europe. Furthermore, in December 2020 Substantive Research also published research showing that the value of analyst meetings had fallen by 47% since COVID-19 had hit the market.
In this second analyst mapping study, Substantive Research specifically focused on the experience levels of the analyst teams – as analyst tenure is a key factor in delivering research quality – and how this has changed since January 2018.
The latest analyst mapping study findings include:
European brokers and banks lost net 3,074 years of experience since MiFID II came into effect, whilst US brokers and banks lost net 4,606 years of experience. The US universe of analysts in the study was 1.8 times larger than the European universe, showing that the effect amongst European firms is more pronounced.
The experience levels of analysts lost to banks and brokers in the three year period averages out at just under 7 years per analyst, whereas the average experience levels for those gained is just under 2 years.
The drain in experience from the research market has begun to stabilise in 2020, with the loss slowing to 928 years over the twelve-month period.
When comparing banks with their research-driven premium broker competitors in the research market, the experience drain is very different, with US and European banks losing 6,287 years of experience compared with premium brokers losing 1,393 years of experience.
The picture varies significantly if you look at each research provider. For example, one provider X has a net gain of 17 analysts since MiFID II came into effect, versus a competitor Y that has a net loss of 138. If you look at experience levels (to check if the provider with the net gain has hired junior or senior staff), provider X has actually lost only 50 years of experience compared to provider Y’s 1328.
In this study, the sample size of current active analysts is 5,300, taken from the largest and most prominent banks and premium brokers, who command approximately 60% of average research budgets.
Mike Carrodus, CEO of Substantive Research, said:
“Whilst we see a significant reduction in the analyst experience levels that the wider market is providing, when you look individually, broker by broker, the picture varies dramatically. It is clear that some firms have used MiFID II and COVID-19’s structural shocks to the research market as an opportunity to gain market share, which is paying dividends for them already.â€
Carrodus added: “It’s only by understanding the experience levels that these analyst teams represent, as well as their staffing numbers, that asset managers can align with the providers committed to offering high value, differentiated research in the areas they require. When asset managers combine this with an understanding of research pricing trends, they can truly maximise the value of their significant research budgets.â€
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Neil Henry
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Substantive Research has been mapping the research provider universe since January 2015 for over 70 asset managers in Europe and the US. The ESG research and data market is where this map has been evolving most quickly in response to needs and available budget from investors.
Whilst there are a handful of incumbents in the ESG data market, the market place is opening up to a large number of new entrants offering data supply in a range of different areas of the ESG universe. Our ESG Discovery Database has already highlighted new launches designed to address the buy side’s current frustrations with the existing landscape. We often hear from clients that their data requirements are not being met by their existing ESG data providers.
In order to ensure that our ESG mapping messages are insightful and actionable, we have been conducting a short survey amongst our asset management clients that seeks to collate their underlying data needs and requirements. It has been a fascinating process with great response, so we have opened this up to any buy side firms interested in participating. All participants will receive a full report on the survey and the key takeaways.
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Neil Henry
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Allows Asset Managers to compare ESG data providers to improve investment decision processes
London, 3 June 2021: Substantive Research, the research discovery and research spend analytics provider for the buy-side, today announced the launch of the latest function to be added to its offering for Asset Managers – the inclusion of Environmental, Social and Governance (ESG) data providers.
The growth in available ESG data continues to gather pace as it factors increasingly in capital allocation decisions, as well as wider stakeholder sentiment. As more data providers join the rush to meet this new demand, the number of potential sources is growing. Meanwhile, longer-established providers constantly update and expand their ESG data products. This rapidly-changing landscape makes discovering, trialling and comparing new data providers more challenging for Asset Managers and other investment professionals.
In response to customer demand, Substantive Research has quickly developed an industry-first, ESG Provider Dashboard, which allows its users to objectively compare ESG data providers in key areas, including:
The number of companies a provider covers
The number of different metrics and data points each provider covers
How often data points are updated
Whether the data addresses an ESG reporting regime (e.g. TCFD or SASB)
Current geographic or regional expertise
Niche specialisms within ESG fields
The ESG Dashboard launched with approximately 100 ESG data providers, rising to 150 providers in July and continuing to increase as the supply landscape continues to change.
Mike Carrodus, CEO of Substantive Research, said: “From listening to our clients, it was clear that they wanted a single place where they could discover and compare suppliers of ESG data in a practical, conflict-free dashboard, and know that they have the most up-to-date view of this quickly-evolving marketplace. Clients need to know about new data providers entering the market, but also want to be aware of new products and datasets coming from existing providers. I am delighted to announce that we have built these new capabilities into our platform.â€
He added: “This new Dashboard helps people who are allocating ESG market data budgets, but it is also proving useful to investment professionals who are integrating ESG criteria into their investment process. We will continue to listen to our users and address their ‘wish lists’ of the further functionalities they need.â€
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