Interactive Buyside LLC, is a recent platform for buy side analysts to share their research ideas with the goal of attracting new investors. Although Interactive Buyside has some distance to go before it challenges existing platforms, its entry reflects the growing acceptance and use of crowd-sourced research.
The Interactive Buyside platform is still new. Its first report was posted in November 2013 and new reports are averaging 3-4 reports per month. Founder Sam Madden says he has enlisted around 200 buy side professionals to contribute and is targeting a rate of 1-2 reports per week. He concentrates on smaller asset managers looking to market their capabilities.
Individual investors can sign up for free to view the site’s reports. In addition, Interactive Buyside has agreements with distributors such as Investor’s Business Daily and Google Finance to distribute reports. Madden, who previously worked at Highland Capital as well as running his own long/short equity fund, plans to expand content to include market research and industry analysis.
Meanwhile, Seeking Alpha has close to 3 million members, claims over 7,000 contributing authors and covers 3,000 stocks. It says 44% of its contributors are investment professionals; 12% are industry professionals; 9% are management consultants or accountants; and 31% are individual investors.
Among its nearly 3 million registered users, it has approximately 35,000 hedge fund professionals, 25,000 mutual fund professionals, and 22,000 other buyside professionals, along with around 79,000 financial advisors, representing in total about 5.5% of its registered users.
Seeking Alpha makes money through advertising and through subscriptions to SA PRO which provides exclusive early access to its best ideas and to its best small- and mid-cap research. Seeking Alpha pays out over $250,000 per month to contributors of premium content. It received a $7 million Series B capital infusion at the end of 2009.
SumZero is a network of over 9000 buy-side investment professionals which makes money through subscriptions, recruiting and capital introductions. SumZero Elite is a premium subscription service which allows individual investors to receive two ideas a month (of SumZero’s choosing) and participation in discussions with buyside members. The platform also has buyside job postings and offers a capital introduction service for asset owners to screen on its database of funds seeking new investments.
SumZero is funded by Winklevoss Capital (SumZero’s founder, Divya Narendra, was an ally of the Winklevoss twins in their early struggles with Zuckerberg at Harvard). Sources indicate that SumZero has been successful in attracting users but is not yet making a profit.
In an earlier blog, we cited academic research which suggested that value for networked investment research decreases as networks become more broad-based. However a study of SumZero’s recommendations submitted from March 2008 to December 31, 2010 found that overall recommendations had positive returns over a 60-day window after posting while non-consensus ideas earned very meaningful returns.
SumZero buy recommendations on stocks with IBES consensus hold or sell recommendations earned cumulative abnormal returns of 3.2% in the 10-60 day window after posting, while non-consensus short ideas earned 7%.
Interactive Buyside has a long way to go before it rivals either Seeking Alpha or SumZero, but its advent suggests that there is room for additional growth for crowd-sourced research.