New York – New research providers grab the headlines, ours included, but sometimes the more interesting stories are the research firms that go out of business. In this environment small research firms are under tremendous pressure, and some are closing shop.
Media attention is drawn to the new research boutiques such as those recently formed by Meredith Whitney or Stuart Graham in the UK. Firms that go out of business don’t issue press releases as founders move on to other pursuits. It often takes detective work on our end to determine that a firm is defunct. As we update our ResearchSelect® database of research providers, we look for firms that are no longer in business. In some cases, the clues are straightforward as websites are removed and phones disconnected, but this is not always the case. We verified JM Dutton’s demise through a cancellation of its LLC listed on California’s business registration website.
Here are a few firms that we have recently classified as ‘inactive’:
- Aperion Group, a Dallas-based boutique specializing in energy stocks founded in 2002, has disbanded.
- Best Independent Research, a consortium of five quantitative research firms formed to gain business during the Global Research Settlement, has disbanded. Each of the five member firms (Ford, Columbine, Thomas White, Ativo, Channel Trend) is still active, however.
- Bradford Research, a boutique founded by steel analyst Charles Bradford in 1998, dissolved and ended its affiliation with the Soleil Group. Bradford, 67, announced in May that he was forming a new boutique, Affiliated Research Group LLC.
- DK Equities Research, a boutique formed by solo analyst Dan Kurz in 2000, filed dissolution papers with the state of Florida effective September 2009.
- Energy Indicators, a boutique formed by energy analyst Mike Henzi in 2002, was disbanded after Henzi joined Sterne Agee as a Senior Research Analyst.
- Fieldstone Research, a Minneapolis-based boutique, disbanded as the principals moved to other activities. Lee Schafer, formerly director of research, is now an investment banker at Northland Securities and Joanne Henry is the owner of Henry Schafer Partners, a marketing firm.
- As we noted in July, AOL shut down the institutional business of Relegence, originally a news engine targeted to PMs and traders.
- Research Associates, a boutique formed by media analyst Marla Backer in 2002, disbanded and ended its affiliation with the Soleil Group. Backer is now an analyst for Hudson Square Research, a New York based boutique.
- Sustainable Investment Research International Company (SiRi), a joint venture formed in 2000 by eleven ESG providers, disbanded in September 2008. The eleven ESG providers continue to be active.
- SurTerre Research, a telcom boutique formed by Todd Rethemeier, disbanded and ended its affiliation with the Soleil Group. Rethemeier is now an analyst with Hudson Square Research.
- Volatility Research, a distressed securities boutique based in Toronto, disbanded.
- Wasserman Morris, a paid for research provider based in New York disbanded. The director of research, Waheed Hassan, is now affiliated with Advent Financial, another paid for provider.
- Westminster Securities, a subsidiary of Hudson Securities (not to be confused with Westminster Research Associates a subsidiary of Bank of New York Convergex), disbanded its research in late 2008 and has not decided when or whether to resume.
In total, we have 11 firms disbanding, of which 8 were fundamental research boutiques. This supports our thesis that there is an oversupply of fundamental research (as opposed to other types of research such as primary or specialized). However, at least one of the analysts has announced the intention of starting up a new boutique and three others are employed at other firms. Two of the dissolutions are joint ventures (Best Independent Research formed to leverage the Settlement and SiRi formed to promote SRI research) with each of the member firms still operating.
Overall the volume of dissolutions is low when compared to a universe of 707 fundamental research firms. The research industry has low barriers to entry but strangely high barriers to exit, as analysts hang on to lifestyle firms and, worst case, go work for other more established firms.