Research is sold not bought, and a review of research distributors shows fewer sellers selling fewer researchers. Prior to the financial crisis, investment banks and agency brokers built distribution platforms for independent research. Since the crisis, many of these efforts have been dialed back, and in some cases eliminated. Nevertheless, agency brokers which have long histories in distributing independent research are still in the game and there are a few firms expanding their distribution efforts.
Goldman Sachs made waves in 2007 when it launched its Hudson Street platform, which made minority investments in third party research firms in addition to distributing their research. At its high water mark, Goldman’s Hudson Street had distribution arrangements with eleven providers. Its website currently cites two firms: TrimTabs and Pacific Epoch (formerly JL McGregor).
BankofAmerica Merrill Lynch’s Open Minds platform is still active, with partnerships to distribute HPDI’s drilling info, NPD, Cypress Group and Litigation Notes. When launched in 2007, Open Minds distributed seven firms and added two subsequently.
UBS also distributed third party research, having relationships with five providers at one point, but appears to have closed the effort. Morgan Stanley was offering primary research through its AlphaWise service, but decided to take the effort in-house, providing the service to its own equity analysts.
Westminster Research Associates, ConvergEx Group’s commission management platform, announced last June that it was expanding its execution network to 150 broker dealers, up from 90 broker dealers two years prior. In part, this reflects ConvergEx’s efforts to pay more broker dealers, including the proprietary research of large investment banks, through its commission management platform. The Jaywalk brand is no longer prominent among the subsidiaries of ConvergEx Group, but the firm still distributes third party research.
Instinet, another pioneer of third party research distribution, currently has exclusive distribution agreements with four providers: Customer Growth Partners, GreenCrest Capital, Trusted Sources, and Decision Economics.
Capital Institutional Services (CAPIS), another longstanding distributor of third party research, currently distributes nine providers including Catamount Strategic Advisors, EnerCom, Value Investment Principals, Vivid Research, Political Alpha, Trend Macrolytics, Market Trend Investors, Rate Financials and Morningstar.
IRC Securities, which offers research firms distribution as well as other services such as dedicated trade execution and compliance oversight, has distribution arrangements with a half a dozen research firms. GRC Jackson Securities offers similar services. Pulse Trading is in the process of merging with State Street Corporation, and expects to continue to distribute independent research after the merger is completed.
Soleil Securities, another early distributor of research, merged in 2011 with Ticonderoga Securities, which shut down earlier this year. WJB Capital, which also distributed independent research, also closed earlier this year.
On a more upbeat note, Bloomberg Tradebook has been expanding its research distribution platform. It currently lists distribution arrangements with fifteen providers on its website: Capital Markets Research, HMCG, IDC Tech Investor, IPO Financial, John Burns Real Estate Investor, Lombard Street, Riedel Research, Roubini, The Analyst, Thompson Research Group, Turning Point Analytics, Two Rivers Analytics, Sales Pulse Research, Veritas Investment Research, and inThought. Unlike many other distributors, Bloomberg Tradebook is expanding its distribution efforts.
The challenge is that in a declining commission environment asset managers are more circumspect about adding new providers. Nevertheless, distributors who are still actively distributing independent research are benefiting from the reduced competition. High quality independent research is still in demand among hedge funds and other investment managers.
For research firms considering distribution partners, we provided some thoughts on what to look for in a distributor, along with other options such as sales agents.