New York, NY – A few weeks ago we wrote an article highlighting the performance of the independent research industry in the Institutional Investor’s 2009 All-America Research Team. However, the 2009 II data is particularly impressive in the context of the historical data, as indie research firms have clearly gained acceptance with the buy-side over the past decade. Today’s blog will discuss this historical trend in more detail.
All of the data reviewed in today’s blog was provided courtesy of the Institutional Investor Magazine.
Indies Barely Make II Rankings in 2000
At the beginning of this century, independent research firms were not as widely used and accepted by the buy-side as they are today. Based on the Institutional Investor’s 2000 All-America Research Team, only 3 independent firms garnered 12 top marks. The three firms were Sanford C. Bernstein, ISI, and Schwab Washington Research Group.
Picking Up Votes in 2001
While the number of independent research firms that posted top II rankings in 2001 did not change, two of the three firms increased the number of top ranks they received. Sanford C. Bernstein and ISI increased their number of top ranked analysts, while Washington Research Group retained one top ranked analyst. Overall these three indie firms garnered 16 top ranked analysts.
Performance slips in 2002
The number of independent research firms that made the II rankings in 2002 increased to 4, though the overall number of ranked analysts slipped to 14. The top ranked indie firms included Sanford Bernstein, ISI, Washington Research Group, and Washington Analysis Corp.
Indies tread water in 2003
In 2003, the number of top ranked independent research firms remained stable at 4, while the number of top ranked analysts rose slightly to 16. Perennial II Ranked firms Bernstein, ISI and Washington Research Group also made the grade in 2003, while SoundView Technology Corp. also received an II ranking in the annual survey.
Significant Gains Posted in 2004
While the number of firms receiving II rankings remained unchanged at 4 in 2004, the number of top ranked analysts these firms received surged to 26. Sanford Bernstein and ISI maintained their top ranking, while Schwab Capital Markets merged Washington Research Group (previously acquired) with newly acquired SoundView Technology Corp. The fourth top ranked indie was Empirical Research Partners.
Increases Continue in 2005
In 2005 the number of II ranked independent research firms remained stable at 4, though the total number of top ranked analysts at these firms increased to 30. These firms included Sanford Bernstein, ISI, Empirical Research Partners, and Washington Analysis Corp.
Number of Indies Recognized Jumps in 2006
The number of II ranked independent research firms jumped 75% to 7 in 2006, while the number of II ranked analysts at these firms rose modestly to 33. The firms that received II rankings included Sanford Bernstein, ISI, Empirical Research Partners, Washington Analysis Corp, Cross Research / Soleil Securities, Knight Equity Markets, and Louise Yamada Technical Research Advisors.
Modest Pull-Back in 2007
In 2007, the number of II ranked independent research firms slipped modestly to 6, while the number of II ranked analysts fell to 32. The firms that received II rankings in 2007 included Sanford Bernstein, ISI, Empirical Research Partners, Washington Analysis Corp, Knight Equity Markets, and Zelman & Associates.
Buy-Side Awards Even More Indies in 2008
Buy-side investors continued to list independent research firms as some of their favorites in the 2008 II survey as 37 analysts at 8 different indie research firms received top marks. These research firms included Sanford Bernstein, ISI, Empirical Research Partners, Washington Analysis Corp, Wolfe Research, Zelman & Associates, and Janet Pegg of Encima Global.
Indies Hit New Records in 2009
As we mentioned in our blog a few weeks ago, independent research firms set a new record with 10 research firms receiving a total of 47 top rankings in 2009. The firms that had analysts ranked as either 1st, 2nd, 3rd or Runner Up in their respective sectors in the annual Institutional Investor survey includes:
- Sanford C. Bernstein
- Empirical Research Partners
- Strategas Research Partners
- Cirrus Research
- Furey Research Partners
- Washington Analysis Corp.
- Wolfe Research
- Zelman & Associates
- Janet Pegg / Encima Global
Impressive Gains Signal Increased Acceptance
When evaluated over the last ten years, it is quite impressive that the number of independent research firms that have received II rankings has increased 233% (from 3 firms in 2000 to 10 firms in 2009), while the number of II ranked analysts at these firms surged 292% (from 12 analysts in 2000 to 47 analysts in 2009).
Some might argue that this trend is a result of the fact that a number of highly regarded sell-side and/or buy-side analysts have moved to, or started their own independent research firms in recent years, including Michael Goldstein of Empirical Research Partners, Ivy Zelman of Zelman & Associates, Ed Wolfe of Wolfe Research, Satya Pradhuman of Cirrus Research, or Jim Furey of Furey Research Partners — not to mention the number of II ranked analysts that have been hired by ISI in recent years.
However, Integrity sees this as a clear indication that top ranked analysts have finally come to the realization that they don’t have to work at sell-side firms to successfully commercialize their brand names, now that buy-side analysts and portfolio managers are comfortable with paying independent research firms for their investment research.
We suspect this increased willingness to work at independent research firms on the part of top ranked analysts, and the growing acceptance of independent research on the part of the buy-side will lead to continued improvement for indie firms in upcoming annual Institutional Investor All-America Team surveys.