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Episode 2: How to improve research consumption tracking and accuracy at investment management firms

March 18, 2020 Insight

The biggest decision in research consumption tracking and accuracy relates to choosing your source(s) of data. This is more complex if your firm is organising corporate access directly; as even though this is paid for separately under MiFID II, most investment firms we have seen have consolidated the process for tracking and reviewing under the same umbrella.

The decision on which data to rely on should be based on the following:

  1. How many front office users your firm has and in how many locations

The wider the net, the more challenging it can be to manage and standardise. Often those firms collecting internal data will rely more heavily on the Research Manager and desk assistants to ensure accuracy, and as the number of personnel increases, the challenge and likelihood of delays and additional effort increases along with it. In this case, it can be easiest to start with sell-side data, which is cleansed by the Research Manager or Desk Assistant, and then passed in a sanitised form to the front office consumer for final review.

Firms with a low number of locations (3 or fewer), or a more reasonable number of front office users (~40 is the number we’ve seen it start to become more challenging), have a better chance at initial accuracy from tracking the information themselves. Depending on your relationships with the providers, you may be able to apply more leverage to them for accuracy.

  1. How many different providers you interact with and the nature of those interactions

Managing the relationships with research providers can be a very time consuming job. November and December can be almost exclusively dedicated to provider meetings in larger firms. In addition to this, the providers you receive the most value from and pay the most are far more likely to take the time to ensure you have accurate data. Those who you pay rarely, or smaller sums may be less willing to investigate issues or breaks. We’ve seen this managed quite well by certain funds by establishing “rules of engagement” around sell-side data submission, resulting in inaccuracies being rejected completely, not fixed; with the onus being on the provider to provide a fully accurate representation of all interactions and appropriate charges.

  1. How much detail you require to complete a meaningful and useful research evaluation

There is no doubt that to record all the information you might want for a more detailed research evaluation, the best method will be to record data internally. The level required will vary significantly by firm, and even in funds within a firm. The simplest approach we’ve seen to this has been in the initial survey which forms the basis of the research evaluation methodology.

Click hear to read Episode 1 -

If you would like to learn more or speak to one of your peers who have experienced and overcome the challenges outlined here, please do not hesitate to get in touch.

 Written by Alistair Downes, VP of Product, Red Deer


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