New York – In recent years, as the money management industry has become more competitive and alpha has become increasingly elusive, many investors have been seeking unique, timely and proprietary information with growing fervor. Consequently, spending on primary research services—which can provide insights about consumer attitudes and company events before they are reflected in the market—has soared. Over the next three years, Integrity expects the primary research space to grow at a rate of 20.9% a year. By 2011, we see the buy side spending over a half a billion dollars on services like expert networks, channel checks, market research studies and management access.
A significant portion of the growth in the institutional primary research industry will be driven by increasing demand for market research and channel checking services. Market research firms, which conduct consumer surveys and other related services, allow the buy side to get a sense of how consumers view various products and services. Channel checking firms, which perform in-depth investigative interviews of supply chain participants, can provide timely insights into company performance prior to earnings releases and other company events.
Today, there are more than 1,000 market research firms and more than 100 channel checking firms in the United States alone, and hundreds of additional firms in Europe and Asia. These firms offer a wide range of approaches and products to help their clients capture valuable information about market trends and events. Yet having all these options also creates challenges. How does an institutional investor sift through the vast array of services to pick out the firms that most directly meet his/her needs? How does an institutional investor even know what his/her options are?
The reality is that most market research firms and channel checking firms are not suited for institutional investors. Of the thousands in existence, only a small subset provide services and expertise that are suitable for buy side investors. The vast majority of these firms are focused on serving corporate clients, and have little experience working with the buy side. Moreover, many of these firms have specialized offerings or focus on specific industry niches, rendering their services inadequate for most buy side investors.
Integrity is currently working to identify the firms that have the best offerings for a buy side investor. Stay tuned as the answers begin to emerge.