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How much do fund managers depend on outside equity research firms
 

technoxplorer's picture
(Chimp, 14
 
Points)
 on 5/8/12 at 10:27pm

Hello,
I'm an undergrad sophomore in NY;
I wanna build a career in investment finance. I wanna ask you all, how much do fund managers(hedge/mutual etc) depend on equity research from outside firms.
And
How big is the equity research market. Do these fund managers buy research from these firms,like sell side analysts and/or brokers?
basically,
I wanna chart a path for my career and need help.
thanks

Tags:
technoxplorer's picture

.

(Chimp, 14
 
Points)
 on 5/8/12 at 10:28pm

.

Shorttermbuy's picture

Q: I wanna build a career in

ER
 
Points)
 on 5/11/12 at 2:57am

Q: I wanna build a career in investment finance. I wanna ask you all, how much do fund managers(hedge/mutual etc) depend on equity research from outside firms.

A: There are thousands of stocks one can invest in and its physically impossible for one person to keep track of EVERY data point or news flow within a market (or multiple markets). So fund managers use the sell side as an information filter/lead, combined with their own research, experience, and input to come up with investment decisions.

Q: How big is the equity research market. Do these fund managers buy research from these firms,like sell side analysts and/or brokers?

BBs research is given to clients for free - in the sense that you "pay" for the research through commissions in trades or a higher vote/ranking in the broker review. Usually there is some minimum revenue amount from commissions needed for a client to get access to your research or analysts but it varies between firms. I am not sure on the practice with smaller houses or specialty firms.

technoxplorer's picture

Thanks shorttermbuy But then

(Chimp, 14
 
Points)
 on 5/11/12 at 1:36pm

Thanks shorttermbuy
But then if through 'soft dollars' is how brokerage firms/sell side survive, then what about specialty equity research firms. How do they make money then?

ILOVENYGUY's picture

Specialty equity research

(Orangutan, 343
 
Points)
 on 5/30/12 at 12:09am

Specialty equity research shops often negotiate straight commissions on individual fund basis and limit access to their analyst/ product based on the level of commissions paid - ie you have to pay $50K / year to have access to our research product

burnsy's picture

.

 
Points)
 on 6/5/12 at 4:29am

.

"All things are difficult before they are easy"
- Thomas Fuller

mal228's picture

In my experience, over 10

ER
(Chimp, 3
 
Points)
 on 6/5/12 at 11:43pm

In my experience, over 10 years of equity research and had my own fund, some firms rely very heavily on outside research and others don't use it at all. It just depends. I think the smarter guys do a lot of their own work to be honest.

yes they buy research from those firms and it cost a lot.

technoxplorer's picture

thank you everyone...

(Chimp, 14
 
Points)
 on 6/12/12 at 11:36am

thank you everyone...

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