Survey Indicates Growth in Independent Research


New York – Bloomberg recently conducted a global survey of institutional investors in which two-thirds of respondents indicated that they plan to use more independent research in 2009.  The survey also suggests that unbundling is not a top priority, and that CSA/CCA’s have low penetration globally.Bloomberg Tradebook, Bloomberg’s agency brokerage, conducted a client survey in late December 2008 in conjunction with its sponsorship of the AQ Research ‘Masters of Change’ conference.  The survey received 1000 institutional investor respondents globally.  Nearly one-third of respondents were from the US and Canada, one-third from Europe, one-quarter from Asia and the remainder from Latin America, the Middle East and Africa.

65% of respondents indicated that they planned to use more independent non-broker research sources in 2009.  “We are pleased that in this environment investors value independent research highly, which plays to Bloomberg Tradebook’s new initiative,” said Frank Porcelli, head of Commission Management Services at Bloomberg Tradebook.  Bloomberg Tradebook has a new initiative to forge alliances with alternative research providers to co-market alternative research product.  The positive outlook for alternative research backs up our own anecdotal experience talking to buy-side clients.

The survey also queried investors on the types of research they see a growing need for in 2009.  Fundamental research was, by far, the most popular response, with over 70% of investors indicating a growing need in 2009.  Given macro uncertainties, economic research and investment strategy were the next most popular categories, each being selected by over fifty percent of respondents.   Quantitative research and technical research followed with 40% of respondents and 33% of respondents respectively.  Industry consultants were selected by nearly a third of respondents (32%).   The least popular choices offered by the survey were primary research and expert networks at 24% and 22% respectively.


Since this was the first time Bloomberg had conducted the survey, we don’t know whether these selections represent increases or decreases from previous use.  We would expect fundamental research to be the dominant choice given its widespread use.  Similarly, economic research and investment strategy are broadly used by all types of investors, and are particularly in demand in the current environment.  Similarly, we are not surprised that technical research scored relatively well, since most investors are trading the market these days, rather than investing.  The low scores for primary research and expert networks reflects the relatively concentrated use of this type of research among a certain class of investor, namely hedge funds.  It may also signal decreasing appetite for primary research, but this is hard to gauge without additional survey inputs.

Bloomberg also provided responses from US investors completing the survey, which differ from global responses in some respects.  Industry consultants were more highly ranked by US investors (the third most popular category vs. the sixth most popular category for investors globally.)  Technical analysis was less highly valued by US investors, being the least popular choice.

The survey also queried investors on their plans for unbundling (“Are you planning to separate sourcing of research from sourcing of execution? (unbundling)”), to which 47% replied in the affirmative.  This might be an improvement over previous years, but, by itself, does not suggest a stampede of investors rushing toward unbundling.

Responses to queries on CSA/CCAs were even less enthusiastic.  Only 15% of global investors (23% of US) indicated they have CSA/CCAs, and 17% of total (23% in US) indicate that they plan on expanding existing CSA/CCA programs in 2009.  These results are a reminder that, although CSA/CCA usage is relatively high on a commission volume basis (ie, large investors are using them), they are not yet widespread across all investors.  Similarly, outside of the US, UK and parts of continental Europe, usage is very low.   Integrity Research recently released a study of CSA/CCA programs as part of its ResearchFocus(SM) service.


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