Investment Research + Massive Industry Shift

I had the opportunity to present KnowledgeBid at the Investorside Alternative Research conference in New York last week (conference agenda), attended by an interesting mix of independent alternative investment research providers and buy-side folks. The investment research industry has undergone massive change in the last 10 years, much of which is a result of the information technology explosion, Regulation FD, and unbundled commissions. The dominant groups at the conference last week primarily fell into three categories: 1) expert networks, 2) data mining, and 3) research management. Very few, if any, new players are producing traditional research reports with buy/sell recommendations or general industry analysis. Even fewer are associated with particular trading desks, something that never would have been seen 10 years ago. The recent explosion of the alternative research space has in large part been at the expense of traditional sell side research.

The sell side and other large financial service players are now actively partnering with, investing, and acquiring alternative research operations. There has been an explosion of activity in the space in the last six months, part of a larger trend that has been emerging since Reg FD was passed eight years ago. I’ve aggregated major announcements and milestones below (let me know if I missed anything interesting).

• 10.23.2000: Regulation FD Ratified by the SEC
• 3.2001 – 11.2001: US Economic Recession
• 10.15.2001: FirstRain $11M Series A
• 4.28.2003: $1.43B Global Analyst Research Settlement
• 7.15.2003: FirstRain $8M Series B
• 7.21.2003: BNY launches Jaywalk initiative
• 2.2004: Bessemer Ventures invests in Gerson Lehrman Group
• 3.4.2005: Standard & Poor’s acquires Vista Research
• 2.6.2006: Goldman Sachs invests in Investars
• 3.2006: UBS announces partnership with ASSET4
• 6.2006: Goldman Sachs launches Hudson Street initiative
  
• 6.29.2006: GS / Hudson Street invests in ASSET4
• 9.7.2006: DFJ invests in Monitor110 $5M Series B
• 10.30.2006: DFJ invests in Monitor110 $11M Series C
• 12.20.2006: Morgan Stanley partnership with Tamale Software
  
• 2.9.2007: GS / Hudson Street invests in Connotate Technologies
• 3.29.2007: BNY / Jaywalk announces alliance with Code Red
• 4.5.2007: GS / Hudson Street invests in iSuppli
• 5.2.2007: Evalueserve acquires Nitron Advisors
• 5.8.2007: GS / Hudson Street invests in Medley Global Advisors
• 9.10.2007: GS / Hudson Street invests in Lusight
• 9.27.2007: Merrill Lynch announces partnership with ASSET4
• 12.19.2007: Silver Lake invests +$200M in Gerson Lehrman Group
• 1.14.2008: Oak Partners invest in $13.6M FirstRain Round (Series C ?)
• 1.25.2008: RiskMetrics $245M IPO
• 2.11.2008: GS / Hudson Street invests in TrimTabs
• 2.27.2008: BNY / Jaywalk announces alliance with Tamale Software
• 3.6.2008: UBS invests in Integrity Research Associates
• 3.21.2008: GS / Hudson Street invests in QSG
  
• 3.27.2008: Morgan Stanley partnership with Gerson Lehrman Group
• 4.7.2008: Standard & Poors / CapIQ announces alliance with FirstRain
• 4.9.2008: Merrill Lynch launches Open Minds with Asset 4; Audit Integrity; Cypress Group; Decision Resources; Global Media Intelligence; HPDI and Primary Source
• 4.17.2008: Instinet exclusive relationship with Norbury Financial