New York, NY – Expert networks are one of the most innovative and compelling investment research models developed over the past decade. In fact, research conducted by Integrity shows that more than 20% of all of the hard dollars and third-party soft dollars spent by institutional investors on alternative investment research is spent on expert network services provided by more than two dozen firms.
As a result of these developments, the team at Integrity Research Associates has conducted extensive research and published a comprehenisive 77 page report on this segment. The following is a short excerpt from the new ResearchFocus: Expert Networks report.
A Fast Growing Segment
The number of expert network providers has grown at an accelerating pace over the past 10 years, as more and more firms have jumped into the space. Over the last decade, the number of firms has more than tripled from seven in 1998 to twenty-four at the end of 2007.
The earliest entrants, including The Roundtable Group and Intota, belong to a generation of expert networks that began before the current model which began in the mid-1990s. These early entrants originally adopted a consulting model.
One of the early drivers in the business was the need for expert testimony in law suits. Intota, for example, is an expert network with its roots still firmly planted in the sourcing of expert testimony for court cases. Other expert networks included academic affiliations, such as the Roundtable Group. These groups primarily sold their services to law firms and corporations.
With the creation of Gerson Lehrman Group (GLG) in 1995, the expert network business was redefined to service institutional investors’ voracious appetite for proprietary information.
Reasons for This Growth
Expert networks have grown in popularity because today investors are conducting more of their own research internally. The buy-side has decreased its reliance on traditional sell side research, partly because of Regulation FD and partly because of the decline in experience of many sell-side analysts. As a result, investors are spending more on hiring and developing their own analytic staffs. Integrity projects that buy side spending on internal research will grow from $5.8 billion in 2006 to $7.4 billion in 2011.
A survey conducted by Greenwich Associates in 2007 supports this view as almost 20% of buy-side analysts planned to reduce their use of sell-side research in the coming 12 months (while almost 30% of hedge funds planned to reduce their usage of sell-side research over the same time period).
Another key driver for the growth in demand for expert networks is the increase in the number and size of hedge funds, with their inherent appetite for proprietary and unique information. Hedge funds are continuously seeking exclusive information, research and data to feed their models and to generate alpha. Expert networks are a powerful research tool for hedge funds, providing unique, differentiated insights which are not generally available in the marketplace.
Integrity’s ResearchFocus is a subscription service which reviews the institutional research industry. ResearchFocus reports cover the research firms in each research segment—even the most obscure and hard to find. The service is designed for directors of research, buy-side analysts, portfolio managers and broker-liaison professionals.
Integrity’s latest ResearchFocus report includes a detailed description of the expert network industry, an analysis of the demand drivers for Expert Networks, a comparative analysis of the top 25 providers in the expert network business, and Integrity’s Top Picks for Expert Networks in the Generalist, Healthcare, TMT, European, and Asian / Emerging Markets categories. For additional information on the latest ResearchFocus report contact Matthew Bannister at 212-710-2603.
ResearchFocus is a subscription service which provides detailed information, analysis, and recommendations from the research experts at Integrity Research Associates. The service includes a total of 5 reports during the coming 12 months on specific research topics such as forensic research, small cap specialists, expert networks, channel checkers, investment strategy, KPO services, SRI / ESG Research, and more. ResearchFocus reports can be purchased either individually or on an annual subscription basis.
If you would like to purchase Integrity’s new ResearchFocus report, please contact Mr. Matthew Bannister at 212.710.2603, or you can purchase this report online at http://www.integrity-research.com/cms/our-services/researchfocus/expert-networks/. The Press Release below discusses Integrity’s new ResearchFocus: Expert Networks report in more detail.
Expert Networks Proliferate as Investors Increase In-House Research
New York, March 3, 2008—Expert networks, which connect investors with industry experts, have doubled in the last five years as investors increasingly conduct their own primary investment research, according to Integrity Research, a specialist research firm covering the investment research industry.
In its latest edition of ResearchFocus, which reviews key segments of the research industry, Integrity identified twenty five expert network firms, up from four firms ten years ago. “Expert networks were initially embraced by hedge funds looking for unique insights,” says Michael Mayhew, Integrity’s chairman and co-author of the study. “Much of the recent growth has come from mutual funds and other long-only investors which are increasing their internal research staff.”
Expert networks and their clients have come under regulatory scrutiny to determine if they are being used by institutional investors to obtain material, non-public information about publicly-traded companies, in violation of securities regulations. In its study, Integrity reviewed the compliance programs of expert networks and formulated best practices guidelines for the expert network industry. Integrity compared each expert network’s compliance procedures to its best practice guidelines. “Regulators have focused on the largest expert networks, which have the most robust controls against leaks of proprietary, non-public information. However, not all expert network providers have made an equal commitment to implementing stringent compliance procedures like the ones we endorse,” added Mayhew.
Integrity also selected its 2008 Top Picks for Expert Networks in five categories of expert networks: Generalists, Technology Specialists, Healthcare Specialists, Europe, and Asia/Emerging Markets. Evaluations of the research providers are based on inputs from institutional investors and Integrity’s own assessments.
Integrity’s 77-page ResearchFocus report includes analysis of the regulatory and market trends impacting expert networks, analysis of the key evaluation metrics such as the breadth and depth of the networks, discussions of the top expert network providers, and reports on each of the twenty-five expert networks. The report is used as a “buyers guide” by research directors and analysts at institutional investors. For additional information on the current edition of ResearchFocus go to http://www.integrity-research.com/cms/our-services/researchfocus/expert-networks/ or contact Matthew Bannister at 212.710.2603.
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 1,600 research firms in the U.S., Europe and Asia. Additional information about Integrity can be found at www.integrity-research.com.
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