New York—Institutional Investor’s annual survey of the Best Boutiques, Regionals and Independents reflects the growing buy side interest in the long tail of research. A survey conducted by Institutional Investor (II) indicated that 36.5% of buy side analysts plan to increase their use of independent or boutique research providers over the next 12 months. This year’s vote highlights a greater diversity of research providers, reflecting the buy side’s growing interest in smaller, boutique providers.
II’s Best Boutiques survey is an off-shoot of its highly visible All-America Research Team survey. Since 2004, II has been asking the buy side to rank independent research providers, along with the major investment banks and regional investment banks. Since the inception, Sanford C. Bernstein & Co. has dominated the rankings, and continues to do so. However, although Bernstein is by far the largest vote getter, the trend in this year’s voting was to highlight additional research providers, reducing Bernstein’s hegemony.
In the 2007 survey, Bernstein won 15 first place finishes, down from 23 in 2006. New winners included Telsey Advisory Group (Retailing/Specialty Stores), American Technology Research (Semiconductors), and three boutiques affiliated with Soleil Securities: Gulley & Associates (Chemicals), Bradford Research (Metals & Mining) and Cross Research (Imaging Technology). Cross Research subsequently terminated its relationship with Soleil after the survey was conducted.
Veteran winners in the independent category include ISI with 4 wins (3 in Macro and Integrated Oil in the Energy sector), Empirical Research (Portfolio Strategy and Quantitative Research), Green Street Advisors (in both its specialty, REITs, and in Gaming & Lodging), Buckingham Research (Paper & Forest Products) and Portales Partners (Consumer Finance).
Cleveland Research Co., which spun out of FTN Midwest in 2006, consolidates its presence in the Consumer sector with wins in Retailing/Broadlines & Department Stores, Retailing/Food & Drug Chains, and Retailing/Hardlines. Like FTN, Cleveland distinguishes itself with extensive channel checking, which is highly valued in the retail sectors.
Soleil Securities also did well in the survey with three newcomers and a repeat winner in Ward Transportation Research which repeated its previous first in Autos & Auto Parts. Each of the winners are small boutiques, which clearly benefited from Soleil’s sales and trading infrastructure.
|Boutiques & Regionals
The theme for the Regional Firm rankings is consolidation. Keefe Bruyette & Woods dominated the Financials sector, squeezing out arch-rival Fox Pitt Kelton (but not Dowling & Partners and Green Street Advisors in the Insurance/Nonlife and REITs sectors). Leerink Swann nearly swept the Health Care if not for spoiler Dowling & Partners in the Managed Care sector. Pacific Crest Securities finished first in all Technology sectors, as did Pali Capital in Media. We expect the consolidation trend to continue, as regionals come under increasing pressure from CCAs. Nevertheless, the firms with high quality research are better positioned to pull through than other regional research firms, which are more likely to exit the research game altogether.