New York – Wolfe Research LLC scored a major coup yesterday, hiring former Bear Stearns colleague François Trahan, one of the top-ranked strategists on the Street.  Ed Wolfe has been looking for ways to diversify his boutique, and the addition of Trahan marks a major milestone for the firm.

Trahan resigned last Tuesday as chief investment strategist of ISI Group Inc, where he was an Executive Managing Director and head of ISI’s Quantitative Research Team.  Presumably discussions with Ed Wolfe were well advanced, culminating in an announcement yesterday that Trahan would partner with Wolfe, becoming the firm’s Vice Chairman and Chief Investment Strategist.

Wolfe Research was formed in March 2008, as Bear Stearns’ once prestigious research department was being absorbed by JP Morgan Chase.  As a top ranked analyst, Wolfe brought a loyal client base to his new firm, and has reportedly done well despite the financial crisis.  The firm now claims ‘approximately’ 20 employees.  Nevertheless, Wolfe’s sector, transportation, is notoriously cyclical and client enthusiasm for his research waxes and wanes with the fortunes of the sector.

The addition of investment strategy greatly expands the appeal of Wolfe Research, and will create more income stability.  François Trahan, however, is not just any strategist.  Institutional Investor magazine ranked him top portfolio strategist for the past two years and for four of the past five.  Last year he also ranked third in the quantitative research category.

Trahan’s departure from ISI Group, a powerhouse firm particularly for strategists, is not unprecedented.  In 2006, Trahan’s predecessor as ISI’s Chief Investment Strategist, Jason Trennert, left with a few others to form Strategas Research Partners LLC.  For ISI defectors, the issue is not pay but ownership.  Salaries are competitive at ISI, but ownership in the firm is tightly controlled by founder Ed Hyman and a few others.

Bear Stearns’ entrepreneurial culture has spawned a number of alternative research firms.   Bear alumni include retail analyst Dana Telsey, who now runs equity research and consulting group Telsey Advisory Group, and former chief economist David Malpass, who formed Encima Global, an economic research and consulting group.  Primary Insight, an expert network now owned by the founders of Vista Research, was incubated at Bear.

Trahan himself is no stranger to independent research, having gotten his start at BCA Research in his native Quebec, and at Ned Davis Research. Now he has come full circle, and, with Wolfe, he is a partner and can benefit directly as the independent firm grows and diversifies.

The press release follows:

NEW YORK, Feb. 8 /PRNewswire/ — Wolfe Research LLC, a premier investment research boutique, announced today that Francois Trahan – ranked top Wall Street investment strategist by Institutional Investor magazine — has joined the firm as Vice Chairman and Chief Investment Strategist.  Wolfe Research, founded in 2008 by former Bear Stearns & Co., Inc. senior analyst Ed Wolfe, has established a reputation for superior transportation research.

Commenting on the hire, Mr. Wolfe said, “Having known Francois for a long time, I am well aware of the expertise, intellect and forthrightness he brings to his research. I am not alone in regarding him as the Street’s best strategist and quant analyst. His insight into the drivers and dynamics of markets is remarkable.  For instance, his bearish call on housing prior to the subprime crash, as well as his push into equities before the market run-up in 2009, were spot on.  Moreover, he made me a better analyst while we were colleagues at Bear Stearns.  I am delighted that he is joining the firm and welcome him as a partner.”

Mr. Trahan was formerly an Executive Managing Director and Chief Investment Strategist at International Strategy and Investment Group (ISI), as well as head of ISI’s Quantitative Research Team.  Institutional Investor magazine ranked him top portfolio strategist for the past two years and for four of the past five. In 2009, Mr. Trahan also ranked third in the quantitative research category.  He joined ISI from Bear Stearns, where he served as a Senior Managing Director and Chief Investment Strategist for four years. Earlier, he was with Ned Davis Research and the Bank Credit Analyst Group. An economist by training and with a master’s degree in econometrics, Mr. Trahan was educated at the University of Montreal.

Stated Mr. Trahan, “I respect what Wolfe Research stands for: non-consensus, thorough, actionable research coupled with a high-touch approach to service.  I am thrilled to be with the firm, and I look forward to helping it continue to thrive and grow.” He added, “Macro research has proven to be extraordinarily important during these turbulent times. I think my understanding of the business cycle and how it affects the markets and specific stocks will allow me to further differentiate the Wolfe Research product with clients.”

New York, NY – A few weeks ago, Waltham, Massachusetts-based healthcare research provider Decision Resources, Inc. scooped up six year old Exton, Pennsylvania-based BioTrends Research Group. BioTrends is a provider of syndicated and custom market research in the specialty pharmaceuticals industry.  Terms of the deal were undisclosed.

Even though BioTrends is a small company with a mere seven employees and revenue of slightly more than $2.0 mln in 2008, the firm is considered to be an expert in the drugs used for kidney disease. BioTrends also covers the dermatology, rheumatology, gastroenterology, and immunology/infectious disease markets.  BioTrend’s expertise in these segments will help Decision Resources to gain greater traction in the biopharma space.

Decision Resources, Inc. is made up of a group of companies providing data, analytics, and research on the global healthcare industry for professionals in the pharmaceutical, biotech, medical device, financial services, and managed care industries.  While Decision Resources has experienced considerable organic growth in recent years, a great deal of the firm’s growth has come from acquisitions.  Besides the BioTrend acquisition, Decision Resources has acquired the following companies in the past few years, including:

• Manhattan Research – June 2008
• Fingertip Formulary – March 2008
• Arlington Medical Resources – December 2007
• Wood MacKenzie’s Life Sciences Business – December 2007
• Millennium Research – February 2006

As mentioned previously, Decision Resources primarily serves various segments of the healthcare industry.  However, in recent years the firm has tried to expand its presence into the financial services industry, including with sell-side analysts and buy-side investors.  To accomplish this Decision Resources joined Merrill Lynch’s Open Minds platform in April 2008 to market alternative research to their institutional clients.  The limited success of this endeavor led Decision Resources to join Gerson Lehrman Group’s Council Partners Program in July 2009.  The jury is still out on whether this partnership will be able to help Decision Resources build considerable traction with the buy-side.

See the complete text of the Press Release below for details of Decision Resources, Inc.’s acquisition of BioTrends Research Group.

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Decision Resources, Inc. Acquires Biotrends

Acquisition Adds Significant Specialized Expertise to Decision Resources, Inc.’s Biopharma Offerings

January 19, 2010—Waltham, Mass. and Exton, Penn.—Decision Resources, Inc., one of the world’s leading research and advisory firms focusing on healthcare insights and analysis, announced today that it acquired BioTrends Research Group, the leader in providing specialized, syndicated market research in clinically complex, small to mid-size pharmaceutical markets. The acquisition of Exton, Penn.-based BioTrends by Waltham, Mass.-based Decision Resources, Inc. will result in a significant expansion of Decision Resources, Inc.’s Portfolio Planning segment of the Biopharma business unit.

Jason LaBonte, Ph.D., newly appointed Chief Operating Officer, Biopharma Portfolio Planning and Optimization said, “This important acquisition expands the breadth of our disease coverage. BioTrends’ deep clinical intimacy with specialized pharmaceutical markets and primary research-focused model enhances our high-value offerings to the biopharma industry.”

BioTrends is particularly well-known in the nephrology market, offering unique insights on drugs in that market. They also cover dermatology, gastroenterology, immunology/infectious disease and rheumatology markets and, as the newest company in the Decision Resources, Inc. portfolio, plan to expand their coverage of diseases.

“We are excited to begin our next wave of growth as a Decision Resources, Inc. company,” said Jennifer Robinson, president of BioTrends. “We bring to the table an emphasis on quality and a level of detail in our syndicated research that is second-to-none.”

BioTrends will remain headquartered in Exton, Penn.

About BioTrends Research Group, Inc.

BioTrends Research Group, Inc. provides syndicated and custom market research to pharmaceutical manufacturers competing in clinically evolving, specialty pharmaceutical markets. For more information, please visit www.Bio-Trends.com.

About Decision Resources, Inc.

Decision Resources, Inc. is a cohesive portfolio of companies that offers best-in-class, high-value information and insights on important sectors of the healthcare industry. Clients rely on this analysis and data to make informed, knowledgeable decisions. With over 450 employees worldwide, analysts at Decision Resources, Inc. companies provide the pharmaceutical, biotech, medical device, financial services and managed care industries with the analytics they need to compete and thrive in an increasingly competitive marketplace. Through both organic growth and an aggressive acquisition strategy, Decision Resources, Inc. has become the premier provider of healthcare analysis and data in the world. Visit Decision Resources, Inc. at www.DecisionResourcesInc.com.

###

For more information, contact:

Elizabeth Marshall
Decision Resources, Inc.
781-296-2563
emarshall@dresources.com

New York – A recent article in Harper’s Magazine on carbon trading casts doubt on the assessment mechanism used to measure and issue carbon offsets:

Carbon trading is now the fastest-growing commodities market on earth. Since 2005, when major greenhouse-gas polluters among the Kyoto signatories were issued caps on their emissions and permitted to buy credits to meet those caps, there have been more than $300 billion worth of carbon transactions. Major financial institutions such as Goldman Sachs, Barclays, and Citibank now host carbon-trading desks in London; traders who once speculated on oil and gas are betting on the most insidious side effects of our fossil fuel–based economy. Over the next decade, if President Obama and other advocates can institute a cap-and-trade system in the United States, the demand for carbon credits could explode into a $2 to $3 trillion market, according to the market-analysis firm Point Carbon.

The UN has a mechanism in place to verify that the offsets underlying the traded carbon credits actually take place:

Never before has the United Nations presided over the issuing of securities, and carbon offsets—authorized through the body’s Clean Development Mechanism (CDM)—are unlike any securities ever created: because such gases emerge not just from factories and automobiles but from felled trees, animal and agricultural waste, and innumerable other sources from every corner of the earth, the supply of promises to reduce greenhouse-gas emissions is potentially infinite. And unlike traditional commodities, which sometimes during the course of their market exchange must be delivered to someone in physical form, the carbon market is based on the lack of delivery of an invisible substance to no one. In an attempt to compensate for this intangibility, the United Nations has certified twenty-six firms worldwide—in U.N. lingo, Designated Operational Entities (DOEs)—to “validate” the promises of emissions reducers and then to “verify,” often years later, that those reductions actually occurred.

SGS is one of two companies that dominate the carbon-validation business. The other is Det Norske Veritas (DNV), a Norwegian firm whose primary business is shipping inspection. Other major players include the accounting firm Deloitte Touche Tohmatsu, the transportation-safety firm Lloyd’s Register, and TÜV SÜD, a German industrial-testing company. Much as large accountancies affirm the balance sheets of corporations, the DOEs are supposed to assess the credibility of emissions reducers by verifying the truth of their statements, in which they are required to predict their own future reductions of emissions.

Some of the issues relating to the measurement and integrity of the research process to measure carbon offsets are eerily familiar to those who have studied conflicts of interest in other areas:

In this highly specialized new industry, perhaps a thousand people really understand how onsite measurement of CDM projects works, and there is a serious potential for conflicts of interest. It is not uncommon for validators and verifiers to cross over to the far more lucrative business of developing carbon projects themselves—and then requesting audits from their former colleagues. Schneider points out that young university graduates entering the field commonly spend several years learning the ropes at DOEs and then “go to work for a carbon project developer, where they make three times the salary doing more interesting work.”

These developers—which partner with local businesses and governments to set up offset projects—are by and large funded or owned outright by multinational firms, particularly financial houses… Far from being independent third-party auditors, the DOEs get paid by these very developers and have to compete vigorously to win business. Plantar’s Fábio Marques told me the company routinely takes “various bids” of differing price from validators.

This is, fundamentally, a paid-for research system. The entire article is an interesting read, and raises the question of whether the UN or other authorities should be paying for independent verification of offsets.

It is always the best policy to speak the truth–unless, of course, you are an exceptionally good liar.
- Jerome K. Jerome

New York – How do you know when someone is lying to you?  Most people have a hard time telling, but there are a few people who have made an entire profession out of the answer.  A recent article in the Guardian highlights how some of these professionals have been using their unique talents to aid Wall Street firms in their daily grind.

The article describes Business Intelligence Advisors (BIA) and the role their consultants have played in helping Wall Street to detect lies by company management during different presentations.  BIA has ties to US intelligence agencies and employs workers with background in interrogation tactics.  The company offers its clients training in detecting dishonesty and also offers consulting services in which its trained experts sit in on calls or meetings.  While it may not be possible to always tell exactly if or why a person is lying, BIA does feel that they are excellent at determining areas which are uncomfortable to talk about and thus deserve more attention.

Also highlighted in the article is a book by Eamon Javers which will hit bookshelves early next week called Broker, Trader, Lawyer, Spy (a nod to the classic espionage novel by John Le Carre: Tinker, Tailor, Soldier, Spy).  The book claims that financial firms have hired employees who are still active in the CIA to aid them in the past.  BIA has denied that they employ active-duty CIA personnel but also admitted to doing so in the past.  They also describe the book as “misleading and inaccurate”.

Of course, BIA is not the only firm offering interrogation training services, as Integrity has a number of firms in their database which offer similar products.  Last season Fox put out a show called Lie to Me which is loosely based on the research work done by Dr. Paul Ekman.  Dr. Ekman works as a scientific consultant on the show, and no doubt draws on his extensive research into the Facial Action Coding System, which helps to identify fleeting expressions on people’s faces which betray their true emotions.  Dr. Ekman first published a manual on these expressions in 1978 and since then his work has inspired a host of other consulting firms which use the basics of his method as a way to train their clients in deception identification techniques.  It seems as if even aviation security officers have taken note of his work and started integrating it into their security protocols.

The techniques used by these professionals are not foolproof.  Critics exist for each of the different methods the companies use and the conclusions drawn by deception analysis training will never be set in stone.  Nevertheless, the fact that Wall Street puts enough stock in the abilities of these consultants to hire them, coupled with the anecdotal evidence of their success shows that there is a place in the market for their services.  Please feel free to contact us if you are interested in more insights on deception training.

New York – News that boutique investment bank Pali Capital is apparently running out cash is saturating the Street. Some indicate that this might occur as early as February. This, after Pali went on a hiring spree in 2009. Like many smaller investment banks Pali saw the demaise of the bulge firms and their acceptance of TARP money as an opportunity to staff up on research analysts, traders and bankers that had been displaced by the bulge bracket firms. Yet, its strategy went off course.

Pali has been plagued with high executive turnover and high legal bills as the founders of the company duke it out in court. Employees are departing at a rapid pace and the firm’s roster has dropped from 250 to 130 since its peak last year.  The two founders Cohen and Reifler are tangled in a dispute that looks more like a bad divorce than corporate litigation. As a result, the parent company Pali Holdings has racked up legal bills in the amount of $4.85 million, according to reports.

The legal risk, as well as cash flow concerns, are at the root of the decision by Braver Stern Securities Corp to break off talks with Pali regarding acquisition. Sam Molinaro (ex-Bear CFO) had been trying to coble a deal together in which he would take over as CEO of Pali and forge his comeback on Wall Street.  

Any solution to Pali’s problems appears to hinge on finding a buyer for the beleaguered bank, but the legal costs and unresolved exposure to more litigation among the founders and from ex-employees will be the greatest impediment to finding a buyer.

New York – First Horizon National Corporation, formerly First Tennessee National Corporation, closed down its FTN Research unit yesterday, after a pending sale to Point Capital fell through.  It is tempting to draw generalized conclusions from FTN Research’s demise, but the reality may be more mundane, according to inside sources.  Once a death spiral begins in a people-intensive business like research, it is hard to stop.

Cratered Deals

First Horizon announced in September of last year the pending sale of FTN Equity Capital Markets Corp to a small asset management and merchant banking firm based in Chatham New Jersey.  The proposed acquirer, Point Capital Partners, bills itself as veteran-owned, and was planning to create a veteran-owned securities firm built on FTN’s capital markets capabilities.  As we commented at the time, the timing of First Horizon’s disposition seemed odd because most regional brokers have been beefing up their research capabilities, reflecting a trend of regional and agency brokers increasing their commissions business at bulge firms’ expense.

According to inside sources at FTN Research, the deal with Point Capital cratered late last year, and discussions were initiated with another potential purchaser.  However, morale plummeted after the Point Capital deal fell through.  Internal staff assumed the worst, receiving little information about their status from First Horizon.  Trading commissions dropped precipitously during January as staff began to focus on looking for other jobs, and last week the second deal fell through.  First Horizon, concluding that the situation was no longer salvageable, decided to shutter the unit and book a $10 million write off.

According to an article the Wall Street Journal, the catalyst for the meltdown was the removal of CEO William Bischoff in October as a result of his relationship with Danielle Chiesi, who was arrested in connection with the Galleon case.  Bischoff was replaced by a First Horizon executive that, according to the article, had little experience in capital markets or the research industry specifically.  Since Bischoff was slated to lead the new venture with Point Capital, his removal by First Horizon understandably disrupted the pending deal.  Ironically, Bischoff was cleared of any involvement with Galleon after his removal by First Horizon.

Midwest Heritage

First Tennessee had built FTN Equity Capital Markets in 2001 with the acquisition of Midwest Research-Maxus Group Ltd., a successful equity research boutique based in Cleveland, Ohio.  Prior to the acquisition, First Tennessee’s capital markets group had fixed income capabilities only.  Midwest Research was a strong research franchise, frequently named by Institutional Investor as among the “Best of the Boutiques”.  Midwest was well regarded by clients for integrating channel checking with its fundamental research.

In September, 2006, forty FTN Midwest Research staffers, including twenty-five analysts, left to form Cleveland Research.  A senior spokesperson for FTN at the time cited differences of opinion.  Cleveland Research founders indicated that they were chafing at FTN’s emphasis on investment banking.  Cleveland Research, like its predecessor, is valued for the quality of its channel checking.  Other distinguished offshoots from FTN Midwest include Longbow Research, which was founded in 2003 by the former CEO of Midwest Research, and Wedge Partners, founded in 2002 by the former head of institutional sales at FTN Midwest.  All the spinoffs from Midwest have remained true to its original channel checking methodology.

What Went Wrong?

Despite the defections, FTN Midwest remained a credible research operation, with around 100 employees and estimated revenues around $80 million.  However, the parent has been reeling from an overhang of toxic mortgage assets generated by aggressive mortgage lending.  First Horizon has been slowly writing down $1.2 billion in non-performing assets, and restructuring its business lines.  According to a company email provided to Reuters, “We had determined that this business [FTN Equity Capital Markets] was not a strategic fit and, thus, entered into the transaction to sell the business. Unfortunately, this transaction was not able to be completed.”   Also unfortunately, the staff members of FTN Equity Capital Markets were also well aware that they were no longer a strategic fit for First Horizon.  As one source put it to us, they knew they were ‘toast’.

It is tempting to draw big picture conclusions from the closure of FTN Midwest.  There is a glut of fundamental research, much of it undifferentiated.  Equity commissions remain tight and investors are scrutinizing carefully how they are being allocated.  The research business is tough.  All true, but it is more likely that the demise of FTN Midwest is more a lesson in mismanagement.  First Tennessee managed to ruin a top notch research boutique, ultimately running it into the ground.  Fortunately, the original spirit lives on in its successful offspring, Cleveland Research, Longbow, Wedge Partners, and those firms which benefit from the latest exodus of FTN Midwest refugees.

New York, NY – According to a new report published last week by New York based financial services consultancy Tabb Group, the quality of a broker’s research has become the most important factor in determining which firms get incremental execution business – eclipsing liquidity as the driving factor.  Consequently, buy-side firms are looking to reward brokers the most for providing insightful research, profitable trading ideas, and access to the IPO calendar rather than supplying fancy algorithms, smart order routers, or great sales traders.

Tabb’s Latest Findings

In Tabb Group’s new report called, US Institutional Equity Brokerage 2010: Assets, Commission Management and Concentration, author Laurie Berke explained that “Head traders absolutely must differentiate between commoditized execution services, value-added execution services and payment for research and ideas.  As they are making greater use of low-touch algorithms, they are increasingly establishing a cost-plus model across high-touch and low touch execution channels to cover their bills.  This puts underlying execution rates for high touch providers under increased scrutiny, and it becomes likely that there will be an increased allocation out of the blended high-touch rate for non-execution product, leaving sales traders a smaller piece of pie.”

Brokers are finding that they can no longer attract increasing trade flow like they did in the past for solely providing certain services – including agency execution, algorithms, smart order routing, block trading, and capital commitment.  Instead, the buy-side is valuing those brokers who provide high quality research services. 

The result of these trends is that the execution to research ration is shifting, with buy-side clients paying more for research and less for trading.  One group that Tabb sees benefitting from these trends is bulge bracket firms.

This does not mean that smaller players are expected to disappear.  In fact, Tabb sees opportunities for boutique brokers who provide high quality execution, insightful research, and investment banking services.  These firms will have their greatest opportunity with small and mid-sized asset managers who are increasingly underserved by their bulge bracket brethren.

These findings were based on interviews with 66 head traders at traditional asset management firms, including most of the largest mutual fund and investment advisory firms in the US.  They manage an aggregate $12.1 trillion in AUM. 

Integrity’s View

The conclusions of Tabb’s newest report are both consistent and inconsistent with the findings of Integrity’s research over the past year.  We agree that buy-side clients are looking to direct more of their execution business to brokers who provide value-added services like research at the expense of agency brokers.

In fact, we suspect that this development is one reason why a number of “agency only” execution firms have been looking for ways in recent months to either create their own research services or partner with third-party research firms to offer more value-added content.   

However, we have not seen the increased consolidation at bulge bracket firms that Tabb has seen.  In fact, we have seen a number of small and mid-sized indie research firms and boutique brokers actually pick up share in 2009, while a few of the bulge bracket firms we have spoken with experienced falling commission volume during the same year.

Regardless, we do agree with Tabb’s basic contention that the buy-side is no longer able to “pay up” for brokers’ trading technology, the liquidity they provide, or the relationships of their sales traders.  Instead, as the market has experience shrinkage in overall commission budgets, the buy-side has been forced to focus on rewarding the brokers most who provide the services that will truly contribute to enhancing their investment returns – including research, investment ideas and access to the IPO calendar.

Capital Institutional Services, Inc. (CAPIS) one of the first firms to focus on distributing alternative research,
announced yesterday an addition to their team.

CAPIS, an agency-only institutional broker which has had a long-standing commitment to independent research, announced that  Anne Barlow will join CAPIS as Vice President, Director of Corporate Access. Barlows’ main responsibilities  will include managing Summit, CAPIS’s agency corporate access service.

Kristi P. Wetherington, President and CEO of CAPIS  stated, “For over 32 years, CAPIS has been dedicated to providing independent research solutions to investment managers. As an agency broker without investment banking or proprietary research interests, we are well positioned to provide our clients with valuable, unbiased insight from top-level management at publicly traded companies. Since launching Summit in 2008, we have been thrilled with the response we have received from our clients. Anne will be a tremendous asset in growing our corporate access initiative.”

Barlow has over 19 years of  experience in capital markets. Previously Barlow was a Senior Analyst at Austin Stock Research where she specialized in short-sell equity research.

About  Capital Institutional Services, Inc. (CAPIS)

Established in 1977, Capital Institutional Services, Inc. (CAPIS) is an agency-only institutional broker, which has had a long-standing commitment to independent research. CAPIS has distribution agreements with 11 research providers in its Independent Research Network, and works with hundreds more sources of independent research. The firm provides an overview and product information of these research providers through its online research database which is accessible to the public. CAPIS is also a member of Investorside and the Alliance in Support of Independent Research, trade associations for the independent research segment.

CAPIS offers execution services including equity trading-domestic and international; Fixed income trading; Program trading; Transition management; Options. Electronic Trading capabilities offered by CAPIS includes CAPISDirect-a direct market access (DMA) system and CAPIS Algorithmic Trading, a suite of algorithmic trading strategies.

New York – A few months ago, this newsletter reported: “Unfortunately, this story doesn’t end happily. Kennedy quit his job as an analyst with Jefferies & Co. in early July and is currently looking for a research analyst position with an independent research firm that has no investment banking conflicts.”

We were referring to Brian Kennedy, an analyst covering the healthcare sector at Jefferies & Co., who faced considerable pressures last year to reverse a “SELL” call he made on CardioNet.  The stock indeed plunged after the call was made in April. Nevertheless, corporate management and other sell-side analysts at firms of the underwriting syndicate instilled high pressure on Kennedy to reverse his call, leading him to abandon the sell-side in looks for a more independent environment to conduct his stock analysis.

Fortunately, this story does have a happy ending. The wires announced yesterday that Brian Kennedy has joined Favus Institutional Research, an independent healthcare equity research firm based in New York City. The firm uses a fundamental approach to evaluate the healthcare sector and make buy-hold-sell recommendations. Favus was founded in February, 2009 by Elliot Favus M.D., who has worked as a healthcare equity research analyst since 2006 at Lazard Capital Markets and Och-Ziff Capital Management Group.

By joining Favus Institutional Research, Brian Kennedy is engaging in a sector where he will be able to make the recommendations he considers more appropriate according to in-depth research and analysis, without facing pressures motivated by alien interests. Once more, the alternative equity research industry offers a home to independent and insightful analysis.

New York – Interesting: After several years of acquisitions of research providers, RiskMetrics has apparently put itself up for sale. The linked article does a great job of assessing the potential buyers, including Private Equity firms, such as KKR and Carlyle Group as well as traditional information services businesses like Bloomberg, Thomson Reuters, McGraw Hill and MCSI.

In its recent spate of acquisitions, RiskMetrics put together an impressive array of research assets, all positioned as risk management tools, rather than investment research. Among the firms now under the RiskMetrics umbrella are Institutional Shareholder Services (ISS), Forensic Account research providers CFRA, and other assets to complete its ring of risk management tools.

Just why the firm is up for sale right now is not known, but it certainly must relate to its relatively new status as a publically listed company (2008).  There are currently three PE firms, General Atlantic, Spectrum Equity and Technology Crossover Ventures, which together own 46% of the stock of RiskMetrics and have invested about $120 million into the firm since 2004. This suggests that this is an exit strategy for these investors.