how much do H/F managers depend on equity research firms?
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
I'm in AM and not a HF, but I assume it's probably similar. We use soft dollars to buy research and have meetings with analysts at various sell side places that cover the companies we are interested in. We don't depend on the actual recommendation at all as 99% of sell-side stuff is buy or hold..
We really just want some of the data, and it's almost always from an analyst that has some type of relationship with our analyst covering the same area.
Thank You Something Creative, But then if through 'soft dollars' is how brokerage firms survive, then what about equity research firms. How do they make money then?
I don't think I follow. The firm gets paid through soft dollars. They also have other people that pay for research reports and other services. Small shops, individual investors, etc.
How much do fund managers depend on outside equity research firms (Originally Posted: 05/08/2012)
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
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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.
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?
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
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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.
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