The research paper author doesn’t want to leave his or her audience in any doubt about what is being discussed or written since the research https://lawessaywritingservice.org/ material will be presented in a really authoritative and professional method.
Life as an equity research analyst has not been a bed of roses since the financial crisis.
Frost Consulting, a specialist in commission unbundling one of the forces that has brought greater transparency to this traditionally more opaque corner of the financial markets estimates that global equity-related commission payments declined by 43 per cent between 2007 and 2012, to $23.5bn a year.
Edison Investment Research, a smaller purveyor of equity research, suggests this led to a halving of analyst numbers to 9,000 over the same period and there is a widespread expectation that the Financial Conduct Authority’s recent clarification of the rules on asset managers’ use of client money to pay for research will lead to a further scaling back of research commissions, at least in the UK and potentially further afield.
Not everyone will shed a tear over the human cost of this bloodbath, but the consequences for the efficient functioning of capital markets may, some argue, be serious.
Even as far back as 2009 there were estimates that 35-40 per cent of publicly traded equities had no analyst coverage whatsoever, a figure that has almost certainly risen since.
The issue has reached the upper echelons of the European Commission. It fears the research vacuum is hindering the growth prospects of small and medium-sized companies, which are more likely than their more heavily traded blue-chip peers to be bereft of coverage.
This in turn has led to a greater focus on the alternative models that may be available to plug the growing holes in provision of equity research.
One alternative is for issuers of equity or the companies themselves to sponsor research by independent analysts; the model however, has one obvious weakness. Business would obviously cease very quickly if analysts wrote reports that expose weaknesses and / or highlight areas of risk. There are also other clear conflicts of interest. For example, analysts don’t know how much is being paid for the research, what third parties are involved, or why it has been commissioned.
The concept draws a parallel with the bond market, where it is the norm for Standard & Poor’s, Moody’s and Fitch to be paid by issuers to provide a rating, although this model was found not fit for purpose in the pre-crisis US subprime mortgage market.
A recent survey of five asset managers found that, on average, they only valued issuer-funded research at 1.8 points out of 10, even when no other research was available. This clearly shows a huge discount for the value of research where the issuer has paid for it. A slightly more popular alternative was research paid for by a third party, such as a stock exchange, valued at 3.8 (compared with 5.6 for broker research and 9.6 for the managers’ own research).
The simplest solution therefore would be for asset managers to conduct more of their own analysis in-house, and to some degree this is happening. Allianz Global Investors, for example, has doubled the number of stocks covered by its own analysts to 2,000 since 2010, with coverage of smaller stocks (with a market cap below 3bn) trebling to 700.
The downside of this approach is that asset managers have to bear the costs of in-house research in their profit and loss account. In contrast, the cost of ‘sell-side’ research could be passed on to investors, potentially without their knowledge.
The CIDG model however, does allow truly independent and unbiased investigation to produce objective and impartial reports, and by making the reports and scoring available to any interested party through an industry specific subscription portal, it can be commercially funded, hence http://www.comparesecondarymarketequityinvestments.guru.