I’ve had interactions with hundreds of asset managers over the years. And do you know what I’ve learned from them?
- They rely heavily on subscription research to make judgment calls on the direction of a stock
- They have their favorite shops and tend to stick with them believing their chances of winning are greater if they do
This ‘inside the box’ thinking may lead to huge losses.
Today’s market ‘is not like it used to be.’ If you’re in the investment industry, you can attest to this statement. I might be quoting your exact words here. But, you might not realize why this is the case.
What is really happening is that asset managers are losing faith in investment research.
Asset managers, I understand your limited investment research options.
And with the emergence of MIFID II, your options are fewer. For example, you make bets within a specific pool of investment research providers that you already have relationships with. But, if within that pool, you consistently go to the same 3 shops for research on everything Consumer-related, for example…
- How do you truly prove or disprove your investment thesis?
- Are you even aware of the strengths and weaknesses of ALL investment research providers in your network?
- How do you know the few research pieces you have provide enough information to support your position?
- When does comparison shopping take place?
I’d love to hear how you handle these questions.
I know of many asset managers who will go to surprisingly great lengths to shop for home or recreational purchases (Am I talking about you again?). Yet, there is an innate complacency when it comes to shopping for investment research.
Personally, comparison shopping gives me a sense of approval because when I finally commit to a purchase, I know I have done my fair share of due diligence before arriving at the purchase point.
We at Differentiated Research pride ourselves on truly understanding investment research providers and placing the right ones in front of you. They come with strengths and weaknesses that are not easily discoverable to the investment industry…until now.
We know it’s frustrating if you are an asset manager interested in Bio-tech making a call to an investment research provider – only to learn that the research provider is no longer covering that space as of 3 quarters ago.
There is a new dynamic in the market. Asset managers want investment research on-demand. What must you do to stay ahead of the game? It’s what humans naturally do…they adapt.
It’s not guaranteed one call is better than another but, what is guaranteed is that there is a better chance of beating the market when asset managers have access to more investment research options.
Let’s work together to unlock the true potential of your investment research provider network.
Thanks for reading.