New York – The Thomson Reuters 2010 Extel Pan-European Survey results showed an increase in the number of independent research firms cited in the top 250 research providers, confirming the growth in usage of independents in Europe. However, the market share of independents in Europe is still small in absolute terms and relative to independent usage in the US.
The Extel Pan-European Survey was conducted in the second quarter by polling the buy side, sell side and IR communities. On the buy side, nearly 1500 firms took part. The survey is the basis for awards given to research firms, which are presented in a lavish ceremony last month dubbed the ‘City Oscars’.
A record 37 independent firms were named among the top 250 research providers in this year’s Extel awards, up from 27 two years ago. In addition, Redburn Partners, an independent pan-European equity research house, became the first independent to enter the top 20 of the Extel survey in terms of votes won.
The growing market share of independents in Europe comes in the context of a dramatic decline in commissions, which are the primary payment mechanism for research. As we pointed out after a recent visit to London, alternative research firms, although ostensibly faring relatively better, are not immune to the overall decline in commissions. And being smaller, they have less capital than the large banks. The growing share is positive for firms like Redburn Partners and Arete Research, while smaller firms are struggling. Nevertheless, alternative research providers are a hardy breed because of their lower costs, and as long as they have a core set of clients to pay the bills, they stay in the game. For this reason, they tend to weather downturns well, and benefit from the upturns.