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March 11, 2008
HFs do more of their own research
Hedge funds are depending less on investment banks and independent researchers and relying more on their in-house version.
"The amount of research that the buy-side purchases from investment banks has absolutely decreased in the past 12 months and is likely to fall further in the future," Michael Mayhew, chairman of Integrity Research Associates, told Financial News.
This is painful news for hedge funds represent 40% investment-banking clients (with traditional fund managers making up the rest), but account for 70% of the total fees. Then there are the fringe benefits the banks lose out on: fees from prime services. The prediction seems to jibe with research conducted last year by Greenwich Associates, which found that 30% of hedge funds polled said they expect to rely less on sell-side research by the beginning of this year.
Mayhew says the trend doesn’t necessarily spell doom for investment banks as they still offer a wider range of research coverage than hedge funds, and self-research may not be an option for every HF. He says only the biggest HFs with the most resources can afford to create their own in-house research teams and absorb the associated expenses.
-emii.com-
Posted by su at March 11, 2008 2:11 PM