Seed Alpha, a recently launched new research distribution platform, combines elements of research management and research distribution in a novel way. Although the research distribution game is getting increasingly crowded, Seed Alpha has chosen a distinct business model.
While the platform seeks to benefit from new regulatory pressures to value research, it does not explicitly price research. Rather, the platform generates metrics that asset managers can use to value research.
The platform has been described as an iTunes for research, but that is a misnomer. Not only because it does not place a price tag on research, but also because the business model is different. Seed Alpha charges the buy side for its software, and does not charge a commission to research firms for distributing research.
The platform is designed to give an audit trail to buy side users who wish to gauge research usage. Buy side users are issued an email on the Seed Alpha platform and are encouraged to have all their sell side brokers direct research to that email. Seed Alpha then indexes the research received and tracks all research consumption precisely, even to the level whether 10%, or 100%, of a report has been read by a user.
Buy side research managers receive reports detailing which research is being utilized and by whom. Aggregated reports rank research providers which have generated the most interest among all the asset manager’s users during the month.
Seed Alpha currently has 104 asset managers on trial, including 10 of the top 20 asset managers globally. It charges $500 per month per user, although enterprise-wide licenses provide discounts on the user fees.
The platform is the brainchild of Edward Stockreisser, chairman and co-founder of AsiaIRP, a trade association of Asian independent research firms. Before beginning work on Seed Alpha in early 2014, Stockreisser was with IND-X Securities and Lombard Street Research.
The platform has received public support from Hong Kong hedge fund manager Ballingal Investment Advisers which said “We’ve seen increasing demand from our investors to know exactly what their money is paying for in terms of research and commissions and this [Seed Alpha] is a great way to easily demonstrate that what we’re paying is adding value and alpha to their portfolios and investment process.”
Seed Alpha’s approach to research distribution is more sophisticated than platforms such as Airex which seek to offer an explicit research marketplace. Its goal is to help buy side firms value the research received rather than putting an explicit price on research. In this sense, Seed Alpha is more similar to research management systems such as Factset’s Code Red or Advent’s Tamale.
Most importantly, Seed Alpha is squarely targeting the buy side, which is the key to any distribution system’s success. Without engagement from the buy side, any research distribution platform is destined to fail.
Seed Alpha has chosen an opportune time to launch, with regulatory tailwinds prompting greater asset manager diligence in research procurement. While there are many new entrants to the research distribution business, its approach seems differentiated from its competitors.