Comments on: Buy-Side Spending on Independent Research – What Numbers Make Sense? http://www.integrity-research.com/cms/2009/07/13/1656/ Tracking developments in the research industry Mon, 01 Aug 2011 14:06:50 +0000 hourly 1 http://wordpress.org/?v=3.1.3 By: Sanford Bragg http://www.integrity-research.com/cms/2009/07/13/1656/comment-page-1/#comment-725 Sanford Bragg Tue, 14 Jul 2009 14:18:17 +0000 http://www.integrity-research.com/cms/?p=1656#comment-725 From Richard Wallace, founder and CEO of Enzard Limited, which provides marketing and account management services to independent research companies in the Asia-Pacific region: In your blog, you state: "As we mentioned in our Thursday blog, we suspect that part of the reason for the differences in our estimates are definitional, as Integrity has a broadly inclusive definition of independent or alternative research. For example, we would not be surprised if Greenwich doesn’t include primary, specialized, or economic research in their definition of independent research." Could the definitional difference lie in the fact that I think you include in your broad definition of “independent” any non-investment bank research, where as I (and maybe Greenwich?) only call independent those IRP’s who have no execution capability? Indeed, if Greenwich do use the same definition as we do, then I am still surprised at their figures - not surprised that the absolute spend has fallen, but surprised at the relative spend fall. I have certainly not seen any thing like the relative decline that Greenwich mention but I have seen a modest decline in spend, through a combination of cost cutting (some of which has been forced cutting by dying hedge funds!) and reduced commission flow. But then I presume they, and you, are just referring to US research (not US+non US research) so again we may be comparing apples to pears! From Richard Wallace, founder and CEO of Enzard Limited, which provides marketing and account management services to independent research companies in the Asia-Pacific region:

In your blog, you state: “As we mentioned in our Thursday blog, we suspect that part of the reason for the differences in our estimates are definitional, as Integrity has a broadly inclusive definition of independent or alternative research. For example, we would not be surprised if Greenwich doesn’t include primary, specialized, or economic research in their definition of independent research.”

Could the definitional difference lie in the fact that I think you include in your broad definition of “independent” any non-investment bank research, where as I (and maybe Greenwich?) only call independent those IRP’s who have no execution capability?

Indeed, if Greenwich do use the same definition as we do, then I am still surprised at their figures – not surprised that the absolute spend has fallen, but surprised at the relative spend fall. I have certainly not seen any thing like the relative decline that Greenwich mention but I have seen a modest decline in spend, through a combination of cost cutting (some of which has been forced cutting by dying hedge funds!) and reduced commission flow. But then I presume they, and you, are just referring to US research (not US+non US research) so again we may be comparing apples to pears!

]]> By: Sanford Bragg http://www.integrity-research.com/cms/2009/07/13/1656/comment-page-1/#comment-724 Sanford Bragg Mon, 13 Jul 2009 14:21:43 +0000 http://www.integrity-research.com/cms/?p=1656#comment-724 From Pat Shea, Executive Director, Investorside Research Association, the trade association for independent research providers: One other reason I suspect Greenwich may have misread the market size of Independent Research is that they seem to look at it simply as: Bundled = non independent and Third Party = Independent. I noticed in one of last years reports that they didn't categorize Sanford Bernstein as Independent, rather labeled them in the "Sellside" bracket. During Investorside's Members Day conference last year there was a panel on trading headed by George Kledaras which discussed the trend of buyside firms trading away from the bulge bracket firms after the Bear and Lehman "lost commissions" episode. I suspect that firms like OTR, ISI and other independent firms with their own trading desks, have received more of their payments in bundled form versus 3rd party since then and that phenomenon has skewed the Greenwich's numbers to overstate the non-independent market share. From Pat Shea, Executive Director, Investorside Research Association, the trade association for independent research providers:

One other reason I suspect Greenwich may have misread the market size of Independent Research is that they seem to look at it simply as: Bundled = non independent and Third Party = Independent.

I noticed in one of last years reports that they didn’t categorize Sanford Bernstein as Independent, rather labeled them in the “Sellside” bracket. During Investorside’s Members Day conference last year there was a panel on trading headed by George Kledaras which discussed the trend of buyside firms trading away from the bulge bracket firms after the Bear and Lehman “lost commissions” episode. I suspect that firms like OTR, ISI and other independent firms with their own trading desks, have received more of their payments in bundled form versus 3rd party since then and that phenomenon has skewed the Greenwich’s numbers to overstate the non-independent market share.

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