Economics, not the demands of regulators, will drive the future of research, which will involve investment managers doing more of their own analysis and also a greater integration between equity and credit research.
These were the points of broad agreement of about 100 fund managers, brokers, and investment analysts at a conference organized by AQ Research in London last month to discuss the future of financial research.
"The future of research will be driven by economics not regulation," argued Lindsay Tomlinson, chairman of the UK Investment Management Association and vice-chairman of Barclays Global Investors, in his keynote address. "Research will be located in the most economically rational place, the buy side, because fund managers have the most incentive to do good research."
Although it might make sense for fund managers to produce more of their own research because it can be a source of competitive advantage, economics might not yet be able to sort out the mess that fund managers and brokers have got themselves into about the future of broker research.
"Economics will win out but the first thing we have to recognize is that the industry is in a mess," said Barry Marshall, chief operating officer (investment division) at Gartmore.