Bloomberg Expands Independent Research Offering
Traders Magazine Online News, October 14, 2011
Independent research is taking on a bigger role at Bloomberg Tradebook. The agency brokerage has nearly doubled the number of “indie” research providers it offers to institutional clients.
Bloomberg began its research program in May with roughly 11 firms, and with recent additions, it now has 20 separate independent providers. The offerings are wide-ranging and include research that is fundamental, as well as industry-specific. Its research product covers about two-thirds of the companies in the S&P 500.
Ray Tierney
“Historically, the majority of Bloomberg Tradebook’s client base has been the trading desk,” said Ray Tierney, president and chief executive of Bloomberg Tradebook, “and what we’re trying to do is broaden our depth and reach by moving upstream to serve the portfolio manager and analyst by supporting an independent research offering.”
Tierney, a former Morgan Stanley brokerage exec, described the arrangements as “partnerships,” adding that Bloomberg has not taken equity stakes in any of the providers. The agreements are not exclusive, either.
Bloomberg has added a research sales team of six in the United States. Global sales is run by Richard Gould, a former Morgan Stanley veteran with a derivatives background. To date, other than the month of August, Tradebook has reached its “reasonable” sales goals for the research product.
Tierney stressed that success will depend upon delivering a “differentiated product” that clients want because it can generate them additional returns over their benchmarks. “Our goal is to drive growth and be innovative in delivering our research product,” Tierney said. “I want to avoid a ‘me too’ product because we want to give clients what they need, not just what we think they need.”
Indeed, commissions have been harder to come by for all brokerage firms over the last two years—particularly for agency brokers without research. Bloomberg’s move mirrors an industry-wide trend of agency brokers adding research to ensure their trading desks stay busy and maintain commission levels. Commissions fell in 2010 by 12 percent, according to Greenwich Associates, and that comes after a 13 percent slide the year before.
These have also been difficult times for independent research, as well. Integrity Research Associates, which helps money managers choose independent research, reports that spending on independents has been in a downward spiral for the last three years.
This year, Integrity reports that spending for independent research is expected to account for $1.47 billion—that’s down from $1.64 billion last year and $1.8 billion in 2009. On top of that, 2009’s spend was down 18 percent from the previous year. The good news is that decline is expected to “flatten” in 2012. Thereafter, spending should begin to climb “modestly” beginning in 2013, said Integrity president Sandy Bragg.
Things looked much rosier in 2006, when Integrity predicted that independent research would reach $2.5 billion by 2010. At the time, independent research was about a $1.8 billion business.
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