When investment banks were slashing the ranks of equity researchers, the buy-side beckoned like a warm, safe, blanket offering a stable – and potentially better paid – option.
Then came the prospect of MiFID II. This forces banks to ‘unbundle’ their research from other services – and therefore question its integrity and depth – spurring demand for top-ranked analysts. Big investment banks have building teams of star equity researchers supported by junior analysts willing to crunch the numbers.
Life under MIFID will be less easy for the independent firms who thought the buy-side would value independent research untouched by large, commission-hungry trading floors.
Maybe this is why Andrew Howard is having second thoughts.
Howard is the former head of Goldman Sachs’ GS SUSTAIN research team. In 2014, he founded his own independent firm Didas Research.
“Investment banking research is changing and there’s greater demand for more in-depth, longer-term focused information. It’s easier for us to innovate, and we’re nimbler without the same large cost-bases of the big firms,” he told us at the time.
Two years on, he’s just taken a research role at Schroders.
The buy-side clearly still holds a lot of allure. What does this say about the impact of MiFID? Nomura, which has just closed its entire equity research division in London, clearly doesn’t think there’s a lot of money to be made under the impending regulation. Investment banks have spent a lot of money staffing-up over the past couple of years and the coming months will test their resolve as MiFID II continues to be delayed until 2018.
“The first question any equity researcher we interview asks us is about MiFID and our approach,” said Laura Janssens, co-head of equity research at Berenberg, which is building its equity research capabilities, adding that they welcome the increased scrutiny it will bring.
A March report by PwC into the future of investment banking suggested that what it calls ‘asset specialists’ – banks which choose to offer expertise in complex business areas – would be the one type of institution to create ‘market-leading research’ as part of their offerings.