Forensic Research Expands Despite Down Markets


  New survey by Integrity Research shows increasing investor appetite for forensic analysis

New York, April 20, 2009 – Despite the market conditions, 33% of investors who currently use forensic research plan to increase their use of this type of research in 2009,  according to a new survey by Integrity Research Associates, a specialist firm which analyzes investment research. Only 9% of existing users plan to decrease their use this year.  The greatest planned increase in use of forensic research is expected to come from Asia.

In its latest edition of Integrity ResearchFocusSM which reviews key segments of the investment research industry, Integrity surveyed analysts and portfolio managers at 184 investment firms, including pension funds, hedge funds, and mutual funds in the United States, Europe, and Asia. Based on the survey, Integrity identified the leading forensic research firms, as part of its Top Picks for Forensic Research.

Forensic research searches for accounting anomalies and other questionable accounting practices.  Integrity’s report also analyzes firms that gauge earnings quality and those that specialize in generating short ideas.

“Investors like forensic research because it has something in short supply from Wall Street research: sell recommendations,” said Michael Mayhew, Integrity’s chairman and co-author of the report. “Hedge funds like forensic research as a source of short ideas and long-only investors like it because it helps them avoid stocks which can torpedo a portfolio.”

The number of firms providing forensic research to institutional investors has more than doubled from ten firms to twenty-one since 2001.  With more countries adopting the International Financial Reporting Standards (IFRS), forensic research is expanding internationally, as globalizing U.S. firms compete with local providers in the U.K. and Canada.

Integrity’s 130-page ResearchFocusSM report evaluates twenty-one forensic research firms based on their methodological style, analytic resources, fees, and coverage.  The report includes the survey results of users of forensic research which ranked firms on twelve different criteria.  Integrity’s Top Picks for Forensic Research are discussed, including an analysis of European short ideas providers and sources of deception training.  The report includes a forecast of the current size of the  forensic research industry by revenue, the future growth of the segment, as well as summary reports on each forensic research firm.

“Hedge funds tend to value firms that provide a limited number of well-researched short ideas each year,” said analyst Ashley Burrell, co-author of the report.  “Long-only managers tend to prefer broad coverage that can help them identify risky stocks in their portfolios.”

A recent example of the value of forensic research was a timely call on General Electric by CFRA, a product line of RiskMetrics Group.   RiskMetrics issued a negative report on GE in May of 2008, when the stock was at $32.51, citing lack of disclosure, increased inventory levels, and “less sustainable sources of earnings.”  The stock closed almost 70% lower at $10.11 on March 31, 2009.  This compares to a 43% drop in the S&P 500 index over the same time frame.

The reports are used as a “buyers guide” by broker liaison staff, research directors and analysts at institutional investors.  For additional information on the current edition of Integrity ResearchFocusSM contact Matthew Bannister at 212.845.9088 or go to

About Integrity Research

Integrity Research Associates, LLC is an information and solutions provider specializing in the investment research industry. Its institutional investor clients use Integrity’s services to find new research providers and monitor existing ones. Integrity ResearchSelect® provides confidential, customized searches tailored to investors’ requirements.  Integrity covers over 2,000 research firms in the U.S., Europe and Asia.   Additional information about Integrity can be found at

Media contact:

Michael Mayhew

212.845.9088 x6859

Integrity ResearchSelect is a registered trademark of Integrity Research Associates, LLC.  Integrity ResearchFocus is a service mark of Integrity Research Associates, LLC.


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