Well, I have noticed that a lot of weird, no name conference organizers have called over the past year or two to promote some event or another. In my field, it is not so much of company research though, but “risk conferences”, effects of CCAR, or other stuff like that. I thought it was just one time things, but come to think of it, I never got that many invitations of this type from this sort of company a few years ago. I wonder if this is a thing now.
I was surprised to read this thread and not hear a single mention of MiFiD II. For anyone here on the sell-side, how are you thinking about its implications, both in terms of the broader industry and also specifically at your firm?
It seemed like it may impact the way the largest buyside guys think about research. But it didn’t seem to have a direct impact on the firm yet. When we would market in Europe, we got mixed feedback from clients. But that plus a few other factors are why I personally decided the sell side is not where I should invest my energy. At least what I saw, the majority of sell side operates in a gray area which regulators are slowly closing in on. And since most of the analysts focus on those gray areas, as opposed to publishing good research, I think it is too much work to find a good analyst in my industry.
The corporate action topic above was related to MIFID 2, although no one said so explicitly. I’m not in research, but I suspect most people will say the same thing - it’s just more bad news. Even if the US will not be directly affected in the short term, cost pressure and potential future disruption to their business model are unlikely to be positive. As far as I can tell, banks are trying to reassure their staff by saying that they will remain committed to the business (unless you are DB, in which case, management is blatant about their contempt for their own employees), but it’s impossible to deny that business uncertainty has increased.
^ thanks ohai, I agree with this. I also see every day the trends that you and CFABLACKBELT described earlier with respect to corporate access. Yes, investors tend to be more reactive rather than proactive in terms of meetings that have already been organized by someone else and all you have to do is show up…but with most banks still getting overpaid in trades relative to the value they produce (e.g. does a large-cap name *really* need 40+ coverage analysts? and if they offer more value than just research, which some do and some don’t, how do we decide which broker-driven NDR or corporate access meeting we should actually attend?), I think all buy-side firms are going to have to take a closer look at how they pay for stuff, and they’ll evolve to being more proactive about directly reaching out to company management teams (which is easier for the larger funds to set up, of course; tougher for smaller funds but they aren’t the ones generating tons of trades in the first place). Ultimately, I think the reality is that some banks are going to ask for too much $$ relative to the value they create and are going to likely be disappointed by the new compensation structure.
Interesting to read about MIFID2 on here. I’m not high level enough to hear anything other than “differentiated reserach”, “investing in our people”, ect ect, already plotting my next move!
For those still on the SS, seems you have 30 months breathing room on MiFID II.
https://www.bloomberg.com/view/articles/2017-10-29/wall-street-analysts-explore-a-new-career-path
SS to IR… I’ve seen a few analyst make this move. I’d be interested if the numbers were right. I assume less stress and less hours?
SS to IR is a good move if you don’t give a shit about investing i guess… I’ve come across a few people on the company’s side, they tend to be more knowledgeable about my questions so I can see why companies take on ex-ss analysts to be on their IR team.
^Nice article!
Sad article…
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i talk to/explain my coverage to a dozen HF guys per week and they aren’t even subject to mifid even if it were applied in the US. but it won’t be cus we have a deregulation regime for the next 8 years. you geeks can shut the fuck up bad-mouthing SS ER
It’s too early to be upset about the bonus buddy. You still got a couple months to turn it around!
In the best case scenario, sure, SS research will not be affected, bonuses will grow, and we will have nothing to worry about. I would like to believe that will be the case. However, it’s pretty short sighted to not pay attention to the many icebergs that might drift into the path of your ship. At the very least, the global universe of sell side research will decrease in value, and that will not be good for industry growth, even in peripheral markets.
It’s also a bit strange to be a proponent of the research business, while dismissing qualified discussion and observations on a business model. It’s almost as if the view or prediction has been rigidly decided upon, and supporting evidence is constructed to support that view. No one in research ever uses this method, amiright??
I agree with ohai, and would add that MiFID II – while particularly affecting Europe – is motivating funds in general to think about how much they are paying the sell-side overall, including the U.S. I believe there will be a positive outcome for the most successful sell-side analysts, but for everyone else, it will be a negative when firms have to pick and choose “a la carte” how much they are paying for sell-side research. There is far too much mediocre product and part of the reason why there is so much discussion around MiFID II is because there needed to be some kind of catalyst to get the average research analyst to step up their game, especially when it’s not uncommon for an experienced buy-side analyst to know more about a given stock than the sell-side (especially on matters such as valuation and investor positioning).
There are many independent research firms founded by ex-ss analysts now, I wonder if that’s going to be future of ss research. I actually like that since the independence was always a question when you have ER and IB under the same umbrella.
This. I blame it on SS focusing too much on maintenance work such as earnings and conferences. Not enough real research being done these days. Also, banking throwing in the last minute initiation report for us to do didn’t help.
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