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Alternative Market Briefing

Big banks’ cut back on research means opportunity for hedge funds, but more bureaucracy can be difficult for new managers

Wednesday, August 06, 2014

Benedicte Gravrand, Opalesque Geneva for New Managers:

Big investment banks have been cutting back on their risky trading operations in the last five years. They are also, in Europe, cutting back on stock research - which may create opportunities for fund managers. However, as banks are avoiding risk and becoming compliant with tighter regulations, they are converting to a more bureaucratic model and are more difficult to access for new fund managers.

Research on small and mid-cap stocks In Europe, banks and brokerages are scaling back on research on small and mid-sized cap stocks – deemed to be too costly and time-consuming, according to Reuters on Monday.

There are 9,000 listed companies in Europe. Thomson Reuters’ figures show that four in every 10 European tracked stocks have seen a drop in coverage in the last two years. And that Europe’s 30 largest banks cut staff by 80,000 in 2013 – some of them equity analysts.

"If it's shrinking, that research is going to be replaced by independent research firms and hedge funds, which are doing their own deep dive and explicitly investing behind their ideas," Soren Aandahl, head of research at activist investor Glaucus, told Reuters.

The cut in big banks research has created opportunity for ent......................

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