New York, NY – Yesterday, alternative trading system provider, Liquidnet announced that it has made a strategic investment in Westchester-based channel research provider, OTR Global, signaling the trading firm’s increased desire to offer primary research to its institutional client-base. Terms of the deal were not announced.
Liquidnet’s minority investment in OTR is important for a couple of reasons. First, it marks the second time in the past nine months that Liquidnet has shown how important providing research is to their ongoing strategy. In the second quarter of 2009, Liquidnet announced the release of Liquidnet Insight, their unique Management Access service. Buy-side investors have long cited management access as one of the more important components of the institutional research service.
The OTR investment is also interesting as it reflects a growing interest of a wide range of agency brokerage firms in expanding their relationships with buy-side clients by providing research in addition to execution services. Following the Bear Stearns and Lehman Brothers implosions in 2007, buy-side firms have increased their trading activity with regional and agency brokers. However, many agency brokers have found that their growth has been curtailed by the lack of a research product.
The Liquidnet deal is not the first time that OTR Global has tried to sell the firm or find strategic investors. OTR suffered a failed auction in the Spring of 2006 as investors were scared away by the company’s reliance on trading commissions to pay for their research. Fortunately, Liquidnet completely understands the execution business and is excited about the prospect of working with OTR to develop new research services that can add value to the execution relationships they already have with buy-side clients.
It is important to note that as part of this deal, Liquidnet WILL NOT be bundling OTR’s channel research service with their execution services (OTR has their own trading operations). However, what is envisioned as part of this relationship is the development of unique new services that buy-side PMs and analysts will value as part of their investment research process.
Off The Record Research (OTR) was founded in 1995 as an independent research firm focused on providing deep investigative channel research for institutional investors. The firm was merged with OTA LLC (OTA), a registered broker-dealer in 1996 to provide a service bundling research with trading for their buy-side clients.
OTR Global is the world’s largest provider of channel research, leveraging the firm’s global platform of over 200 journalists. In June 2008, Integrity conducted a comprehensive study of the channel checking business, and rated OTR as our Top Independent Channel Checking Specialist based on the firm’s broad coverage, wide distribution, and scalability.
Refer to the full text of the Press Release below that discusses this development in more detail.
Liquidnet Announces Strategic Investment in OTR Global
Strategic partnership allows both companies’ clients to leverage best–in-class global research and trading
NEW YORK–(BUSINESS WIRE)–Liquidnet, the global institutional marketplace™, today announced it has completed an investment in OTR Global Holdings II, Inc., the parent corporation of OTR Global LLC, a premier alternative research company that generates unique and proprietary market intelligence for institutional investors worldwide.
“Our decision to partner with OTR is in recognition of our Members’ increasing usage and reliance on primary intelligence in their investment decision-making process,” said Seth Merrin, Founder and CEO of Liquidnet. “OTR is an innovator in the primary research space, and Liquidnet is excited to partner with them and add their network to our community. OTR’s network will add great value to our growing Management Access business.”
Liquidnet’s Management Access services are focused on bringing greater efficiencies and transparency between institutional investors and corporate management. With the launch of Liquidnet Insight™ in the second quarter of 2009, Liquidnet expanded its global investment community to include traders, portfolio managers, analysts and issuers.
OTR Global’s team of more than 200 reporters around the world conducts approximately 38,000 in-depth interviews per year with qualified, unpaid sources to generate intelligence on specific sectors and on-demand topics. OTR Global’s research services, along with Liquidnet’s ability to connect investors with company management teams, create a competitive advantage for institutional investors looking for differentiated investment ideas and validation.
“We are excited about the partnership with a like-minded firm such as Liquidnet,” said Stanton Green, President and CEO of OTR Global. “This investment and partnership will not only enable us to collaborate with Liquidnet on innovative products, events and services, including Management Access, but allows us to expand our sector intelligence and global reach for our clients, particularly in areas like China. Through our complementary areas of expertise, Liquidnet and OTR together can drive more value for our clients.”