In the zero-sum game of the 2021 Institutional Investor All-America rankings, four firms gained 4 or more ranked analysts while three brokers shed 4 or more. The top six brokers remain deeply committed to the game, while many of their peers waver in their participation from year to year. As Institutional Investor celebrates the 50th anniversary of the All-America Research surveys, the rankings remain a key metric for research mindshare. However, the question remains how critical research mindshare is to equities success.
J.P. Morgan continued in the top spot for the sixth consecutive year, besting second-place BoA Merrill by three ranked analysts. These banks have been the most active participants in the II beauty pageant for over a decade. Meanwhile, Morgan Stanley and Evercore ISI have been duking it out for the number three spot since 2015. This year, Morgan Stanley topped Evercore ISI by one analyst.
UBS has been the steady Eddie, generally content to hang on to the fifth ranking since 2016. Wolfe Research is the Cinderella, anxious to take its place among the top research beauty queens as it ascended to the number six spot. The other notable gainer in 2021 was Barclays, which shook off a weak 2020 effort to return to the top 10.
Morgan Stanley, Wolfe Research, Barclays and Evercore ISI were the biggest gainers in 2021, each adding 4 or more ranked analysts. 19 of the top 26 firms with ranked analysts had minimal changes to their ranked analysts, shifting by 1 analyst or not at all.
Citi continues to turn its back on the rankings game, giving up another seven ranked analysts after dropping sixteen last year. It has fallen to tenth from third place as of 2019. Credit Suisse is another on-again, off-again player, losing six ranked analysts this year after gaining eight last year. RBC also appears to have lost heart in the II process, forfeiting 4 ranked analysts after losing five last year.
Changes Over Time
When we examine the change in the number of ranked analysts between 2013 and now, we see the four bulge banks most committed to research mindshare: JP Morgan, Bank of America Merrill Lynch, Morgan Stanley and UBS. Each bank has gained ranked analysts since 2013.
The fastest growing players of the II rankings game have been Evercore ISI, Wolfe Research and Wells Fargo. Each have added over 15 ranked analysts over the period. Evercore ISI remains the champion gainer, having increased by 23 analysts.
Not surprisingly Deutsche Bank has fallen furthest, losing 24 ranked analysts since 2013. Barclays, Citi and Bernstein are also down significantly over the eight years.
Do Research Rankings Matter?
It remains an open question whether success in the II surveys has any monetary value other than bragging rights. A case in point is Evercore ISI, which became one of the top five US research franchises in 2014, according to the All-America poll. ISI revenues grew 16% that year yet fell the following year when it ascended to third place – and have languished since.
In contrast, Bernstein Research has lost eleven All-American ranked analysts over the last eight years while revenues have remained relatively stable. In 2020, Bernstein had its worst showing in the rankings over the last eight years while revenues increased 13%.
Institutional Investor changed its methodology in 2019 to weight buy-side votes by commissions paid rather than assets under management. In theory, this should have correlated the rankings more closely with equity revenues. In practice, as the Bernstein vs Evercore ISI revenues illustrate, the link between analyst rankings and revenues seems tenuous at best.
Goldman Sachs, a long-standing skeptic of the contribution of research to equities success, has never been an enthusiastic participant in the II beauty pageant. The other three leading equity franchises – Morgan Stanley, JP Morgan, and Bank of America all see research as a key component of their equity franchises. They are joined by UBS which has made large investments in beefing up its research capabilities through UBS Evidence Lab.
But the rankings skeptics seem to be growing. Citi made a huge effort in 2019, adding 14 ranked analysts and shooting up to the #3 spot, only to walk away this year and last. Bernstein seems to have quietly opted out. RBC, after adding 18 ranked analysts from 2013 to 2019, has shed 9 ranked analysts in the two years since. Credit Suisse and Barclays seem to waver in their commitments from year to year.
In our view, the problem doesn’t lie in the II rankings themselves, even though they can be gamed by concerted efforts from sales staff and analysts. The rankings, whatever their flaws, represent a reasonable proxy for research mindshare. The deeper issue is the ultimate utility of research, especially as it becomes increasingly divorced from commissions.