New York – youDevise Ltd. Of London and First Coverage of Boston recently announced that they would combine their firms to form one entity which will operate under the youDevise name. The two companies expect the combination of services to be complete by 2011.
The most obvious reason for the merger is that the combined enterprise will now have a stronger presence in two continents, North America and Europe. youDevise expanded into North America in 2007 but First Coverage’s North American based headquarters will allow the sales forces’ from the two companies to combine more effectively.
The two companies will also have the added benefit of being bigger, now providing a system that will serve over 150 institutional investors and combine ideas from more than 560 sell side firms with more than 2,000 ideas a day. This should help them compete with FactSet’s Alpha Network, a product that FactSet acquired as part of its purchase of StreamVPN in September of 2005.
Commonwealth Capital Ventures of Boston, GrandBanks Capital of Boston, and JLA Venture s of Toronto all invested in the merger. Each of the firms was also an initial investor in First Coverage.
Even with these added benefits, the obvious question that remains is whether alpha capture platforms have gained significant traction with the buy-side. A Financial Times article provides this quote from Matt Simon at Tabb group: “In the US [an alpha capture system] hasn’t really taken off yet, as it has in Europe to some degree. US hedge funds are still reluctant to try it in their everyday decisions…Some firms thought it sounded backwards: They were the ones generating ideas to give to their brokers.”
Another interesting idea is whether trade ideas platforms such as these violate regulatory requirements which mandate that a firm’s research is distributed to all clients at the same time. Systems such as these may incentivize salesmen to focus undue attention on clients with these systems in place since they know that their commissions are directly tied to the performance of their ideas. It is important to note that no regulators have started investigations into this topic.
One final thought pertaining to independent research providers is that models such as these, which charge the research firms for the right to send their ideas over the platform traditionally, have worked well for the sell-side which has the resources to pay to push their ideas to the buy-side but may not make as much sense for independents. In the case of a one man shop, can the analyst really afford to pay $100 a month to channel his ideas to his clients or would it make more sense to do the deal directly with the buy-side in the first place.
The press release is below.
youDevise and First Coverage Merge to Form Global Trade Idea Network for Institutional Investors
LONDON and BOSTON, March 15, 2011 – The leading providers of alpha capture networks for financial markets – youDevise Ltd. of London and First Coverage of Boston – today announced they have merged into a single entity, forming the first comprehensive global network for institutional investors and brokerages.
youDevise and First Coverage market online services that enable institutional investors to receive short- and long-term trade ideas from their brokerage firms, making it easier for money managers to identify ideas with real value. Trade ideas are time sensitive, client specific long/short recommendations, based on all information likely to affect a stock’s price near term.
The combined company, which will operate under the youDevise name, serves more than 150 institutional investors, including major hedge funds, traditional money managers, and specialist alpha capture funds, and more than 560 sell side firms, from the largest bulge brackets to smaller boutiques. Together, the two platforms transmit more than 2,000 ideas a day, up 60% from a year ago, on stocks primarily traded on markets in the US, UK, Europe and Asia.
youDevise launched its Trade Idea Monitor (the TIM) in 2005 and First Coverage debuted its eponymous service in 2006. Integration of the platforms is expected to be completed in 2011, with the best features of First Coverage becoming part of the TIM. Until then, users will have continuous access to their service of choice and will be updated when new enhancements are released.
Investors in the merger include a syndicate of venture capital firms comprised of Commonwealth Capital Ventures of Boston, GrandBanks Capital of Boston, and JLA Ventures of Toronto. All three were original investors in First Coverage.
The merger will give money mangers access to brokers with specialties in all developed and emerging markets. The merger will eliminate the need for brokers to use multiple systems and help reach a greater number of clients. For both, the merger will increase 24/7 sales and support through youDevise offices in London, New York, Boston, Toronto, and Hong Kong.
“youDevise is pleased to join forces with the First Coverage team because we are both passionate about the future of trade ideas,” said Colin Berthoud, Founding Partner of youDevise. “The merger makes tremendous sense for our clients who can use the combined network to access knowledgeable counterparts on any scale of stock, in any sector, anywhere in the world, while providing brokers with new ways to monetize their intellectual property.”
“Our shared ‘customer first’ commitment, to help the buy and sell side create value from trade ideas, will be significantly enhanced,” said Roland Beaulieu, CEO of First Coverage. “Given the alignment of our visions, technologies and strategies, the combination of youDevise and First Coverage creates the premier alpha capture platform in the world.”
“The continued financial support from institutional investors underscores their confidence in the rapidly growing alpha capture market,” said Jeff Hurst, a General Partner and Co-founder of Commonwealth Capital Ventures. “Its strengthened position enhances youDevise’s ability to meet the increasing global market demand for what has become a highly dynamic new front in institutional investing.”
The combined company is headed by Rich Koppel and Colin Berthoud, founding partners of youDevise. First Coverage’s Roland Beaulieu and Commonwealth Capital Ventures’ Jeff Hurst have joined the youDevise Board of Directors.
In addition to the TIM, youDevise markets the Hedge Fund Information Provider (HIP), the leading online platform used by Funds of Hedge Funds directly or through large administrators, such as Northern Trust (NASDAQ: NTRS), for front, middle and back office management information and decision making.