THETRADETECH DAILY news
THE OFFICIAL NEWSPAPER OF TRADETECH 2022
ESG influence The research also noted that while spending on ESG research is increasing rapidly , it still commands less than 1 % of the average research budget ( up from 0.47 % in 2019 ), suggesting that while the issue gets a lot of airtime , this is not yet being backed up by the budgets . Spend is also focused on data rather than external research , which remains under-developed .
However , Carrodus believes that this will change – and that this is where European research providers have the chance to make their mark . “ We ’ ll see big changes in the next 12 months as people look to ESG research to help support their investment decisions . The messages from the data can be inconsistent , so people will be looking to protect themselves by understanding what they ’ re holding at a deeper level , rather than just trusting someone else ’ s rating . So ESG is the one area where smaller providers might able to tap budget and take market share .” of information .”
And suddenly , it seems the worm is turning . Now , in the current unprecedented geopolitical and economic circumstances , suddenly people are needing more varied research again , and they don ’ t know where to get it from .
“ MiFID II doomsayers predicted that the regulations would make the market much less competitive , and specialist , differentiated research would become less available in times of heightened volatility ,” said Carrodus . “ What we are seeing now with volatile markets is a stress test proving them right , where we do not have sufficient energy analysts , for example , and asset managers are defaulting to their core relationships , the handful of bulge-bracket firms which dominate market share . There are high quality independent providers who can provide real expertise in these areas , but they are struggling to get paid for their efforts .”
Looking ahead So what can we expect for the coming year ? It looks like given current conditions , the shoe might finally be transferring to the other foot and , after years in the wilderness , research providers are snatching back a bit of bargaining power . And that , inevitably , is likely to influence prices .
Seventy percent of survey respondents already anticipate cost pressures from the core research providers – who are already paid well . Brokers and independents understand that , in this more volatile market and with deep uncertainty around the geopolitical turmoil , “ have-to-have ” research providers gain greater leverage with clients – and will use the opportunity to reverse the pricing trends of the past four years .
But not everyone is on the same journey or will reap the same rewards . In 2018-19 all research providers were in the same boat – budgets were going down , everyone was hit . Now the situation is rather different , and every provider is going through a different experience – some are seeing their pricing power improve , while others are spiralling in terms of leverage with their clients .
“ It ’ s a vicious or virtuous circle , depending on where you are sitting ,” agreed Carrodus . “ Research is being used more intensively right now than it has in a long time , and people are leaning hard on the providers that are hitting the right pain points . Some providers will get increasingly less relevant , but the people who stuck to their guns and retained highly ranked and tenured analysts will want their chunk of change .
The end of this year could potentially see an interesting negotiation period . Up until now the supply side of the research market has just accepted the price pressures and blinked . But that dynamic could be about to change , as these providers start to understand their new leverage .
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