Substantive Research, the research discovery and research spend analytics provider for the buy-side, has today published a survey into how asset managers have changed their approach to research payments during Covid-19.
The findings indicate that the value asset managers place on one-to-one interactions with analysts has fallen by 47% since the pandemic began and all physical meetings became virtual. Group meetings fared only slightly better, with the rates paid for virtual as opposed to face-to-face meetings dropping by 35%.
This is despite the appetite for research increasing and analyst engagement rising over the same period of time. The drop in value applies to asset managers that agree annual all-in prices at the beginning of the year, as well as those that value and pay for research after consumption.
The survey also indicates that from the start of the Covid-19 crisis, 40% of asset management firms who agreed a total research payment in 2020 have since recalculated and reduced their payments to providers in light of market uncertainty and structural changes in research consumption.
Annual research budgets can vary greatly depending on the size of the firm, from $1m - $50m+ for the largest asset managers. Analyst interactions make up 50-70% of research budgets with one-to-one meetings as the main driver of those payments.
Substantive Research surveyed 20 asset management firms across the UK, Europe and the US, with AUM ranging from $30-$800 billion and a combined $4.9 trillion in assets.
Mike Carrodus, CEO of Substantive Research, commented: “The demand for research products has soared during the pandemic as a result of market volatility and uncertainty. In fact, one of the trends accelerated by Covid 19 is the insatiable appetite for data, research and tools to interpret market events. Furthermore, we have seen an acceleration in engagement facilitated by ease of access to virtual meetings and events, as there is a lower barrier to entry to attend these meetings.”
He added: “However, our survey shows that asset managers do not rate virtual meetings the same as face-to-face interactions. They lack the value derived from the informal side of physical meetings, where questions and analysis that were unscheduled would still be addressed. Asset managers also recognise the absence of exclusivity from online engagements, meaning that these are valued at a lower rate despite the experience and insight provided. For these reasons, virtual interactions are also generally shorter in duration, which often leads to a lower valuation and payment.”
Daniel Murray, Deputy CIO and Global Head of Research, EFG recently addressed the Substantive Research ‘Unbundling Uncovered’ event audience, commenting: “It is clear that the market has shown it has the technology available and the willingness to communicate virtually. As a result, it raises the bar for asset managers to justify their expense to meet with companies and attend conferences. However, seeing the whites of someone’s eyes cannot easily be replicated virtually, so there may always be a place for physical interactions”.
Mike Carrodus, CEO of Substantive Research, concluded: “Relationships between asset managers and their research providers have deepened during the recent market uncertainty and I can foresee a full-scale, industry-wide return to in-person interactions as soon as circumstances permit. However, after an initial frenzy of physical interactions, I expect the market to self-correct and continue to seek the benefits and efficiencies gained from digitised engagements during the pandemic.”
Source: Substantive Research