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Indy Sarker

Analec

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Indy Sarker

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Alexander Tabb

TABB Group

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Alexander Tabb

Is Investment Research a Dying Business?
25 April 2013:

The sell side had been providing equity and fixed income research to the buy side for as long as anyone can remember. Faced with a shrinking commission pool, increasing competition, and decreasing product differentiation, however, many sell-side firms are asking if there still is value in the investment research business. According to Indy Sarker, managing director, ANALEC, the economics of the business are increasingly removed from the realities of the marketplace, as the capacity for coverage is vanishing. The cost for a single analyst to cover just one company, he says, can run as high as $60,000 a year. But marrying investment analytics with technology as a delivery mechanism can provide a solution, Sarker adds.

Interviewer Alex Tabb   Source: TABB TV   Categories: Equities, Technology, Fixed Income
Topics: Asset management, Equity trading, Fixed Income, Research and analytics


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1 Comment to "Is Investment Research a Dying Business?":
  • Comment_tabb_-_paul_rowady_hi-res
    prowady

    22 May 2013

    This is a great topic for further exploration.  The "capacity" of coverage by a single analyst is an age old topic.  as a health care stock analyst at the beginning of my career, I struggled with this challenge very early on.  With significant automation and outsourcing options available for a while, I would suggest that the cost factor has already been adjusted.  In other words, research firms (or research departments in large sellside firms) have already harvested savings in this business model.  The problem is, it needs to be adjusted further given the current and forseeable environment. 

    There is no clean answer here.  Different firms, with different objectives will attack these challenges differently.  However, I am wondering if it is time to hand over company quantitative scoring to the models and instead place research analysts in charge of topics and theme coverage instead of company coverage.  chances are this is already happening directly and indirectly, and analec is part of that migration.

    At TABB, we have a similar challenge.  Our bais tends to be more thematic than company specific. 

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