June 2021 Update: Substantive Research, the research spend analytics and research discovery provider for the buy-side, published findings of its latest study analyzing sell-side firm’s analyst moves and experience levels starting in January 2018 with the implementation of MiFID II. The analyst mapping exercise found significant juniorization of the global research market with 7,500 years (net) of analyst experience lost over the past three years. 

Mike Carrodus, CEO of Substantive Research, said: 

“While we see a significant reduction in the analyst experience levels that the wider market is providing, when you look individually, broker by broker, the picture varies dramatically. It is clear that some firms have used COVID-19 and MiFID II’s structural shocks to the research market as an opportunity to gain market share, which is paying dividends for them already.”

The study leveraged Substantive Research’s Analyst Mapping tool, which allows asset managers to gain an aggregated view of banks’ analyst moves, their seniority, and sector coverage. Using the tool, managers can now clearly see which brokers are investing or disinvesting in experienced analysts covering the sectors and asset classes pertinent to their strategies. As a result, they can allocate their research budgets more efficiently, easily identify price and coverage mismatches among their providers, and ensure the quality of research is maintained.

Carrodus added: “It’s only by understanding the experience levels that these analyst teams represent, as well as their staffing numbers, that asset managers can align with the providers committed to offering high value, differentiated research in the areas they require. When asset managers combine this with an understanding of research pricing trends, they can truly maximize the value of their significant research budgets.”

The latest study found:

  • US brokers and banks lost a net 4,606 years of experience. European brokers and banks lost a net 3,074 years of experience since 2018 when MiFID II came into effect.  The US universe of analysts in the study was 1.8 times larger than the European universe, showing that the effect amongst European firms is more pronounced.
  • The experience levels of analysts lost to banks and brokers in the three year period averages out at just under 7 years per analyst, whereas the average experience levels for those gained is just under 2 years.
  • The drain in experience from the research market has begun to stabilize in 2020, with the loss slowing to 928 years over the twelve-month period.
  • When comparing banks with their research-driven premium broker competitors in the research market, the experience drain is very different, with US and European banks losing 6,287 years of experience compared with premium brokers losing 1,393 years of experience.
  • The picture varies significantly if you look at each research provider. For example, one provider X has a net gain of 17 analysts since 2018, versus a competitor Y that has a net loss of 138. If you look at experience levels, to check if the provider with the net gain has hired junior or senior staff, provider X actually lost only 50 years of experience compared to provider Y’s 1328.

The sample size of this study was 5,300 current active analysts, taken from the largest and most prominent banks and premium brokers, who command ~60% of average research budgets.


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