It’s now four years since MiFID II collided with Europe’s age-old research model.
By requiring brokers to separate payments for research and execution, MiFID had a significant impact. Investment banks, which once dominated the research landscape, have been forced to scale back their equity research desks and kill off their practice of using research as a loss leader.
At the same time, the research climate has altered. Investors have increased their focus on research spend and there is a greater appetite for primary research. The confluence of these factors is creating a flourishing research market where exotic alternative data and proudly independent research thrives.
Of course, this evolution hasn’t been linear. Research spend was rationalised in 2020 as the global economy was battered by Covid. This demand shock saw many smaller research companies fall away.
Last year was the polar opposite, with a wave of pent-up demand, particularly in private markets, flooding into the research space. We saw very strong momentum in the primary research sector, with the expert network segment posting growth rates of over 17% between 2019 and 2021. This surge, as well as an imperative for getting deals done, meant more demand for bespoke research and compressed timelines.
The popular adoption of working from home has also had an effect. People are more discerning about which events they will attend and desktop research is more important — with analysts sifting through more data sources, podcasts, tweets, and expert interview transcripts than ever before.
At the same time, working from home has highlighted how certain parts of the investment industry need to digitise and tag content. Too many investment managers still live in an analogue world, reliant on spreadsheets, Word documents and email communication.
What is more consistent is a willingness to pay for high-quality, differentiated research, and we don’t see this trend abating anytime soon. In many ways the industry is in rude health. But — and there is a but — a larger and more diverse industry has become harder for fund managers to navigate, with a multitude of signals now competing for attention.
This leads me to think we have, for now at least, reached peak data. By that I mean there is such an abundance of information available, it is more than any one person could possibly consume. So if the research trend 10 years ago was about more data sources, then I expect the next few years to be about integration.
The research category no longer needs to think in terms of serving up additional sources of data and insights. Instead, tomorrow’s winners will focus on how insights can be better curated, synthesised, and integrated. What can we do to make sure our content can be visualised, aggregated, and qualified? How can research providers digitise their content to provide more intuitive access? And, chiefly, how can we really embed our content into each investor’s workflow?
With the age of the investment bank dinosaurs now past, success is no longer about unearthing more research content. It is about being personalised, relevant, and directly plugged into the investors we serve.