Integrity Research Associates


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Integrity Research Associates

  1. 1. Leveraging Alternative Research
  2. 2. Who We Are <ul><li>Integrity is a research firm focused on the fast-moving investment research industry itself </li></ul><ul><ul><li>We cover 1,700 research providers globally, specializing in the ‘long tail’ </li></ul></ul><ul><li>Clients are primarily institutional investors </li></ul><ul><ul><li>Investors use us to find innovative research, evaluate current research sources and assist with research procurement </li></ul></ul><ul><li>Integrity is unbiased and objective in its recommendations </li></ul><ul><ul><li>No “hidden agendas” </li></ul></ul><ul><ul><li>Revenues come from </li></ul></ul><ul><ul><li>clients not from </li></ul></ul><ul><ul><li>research providers </li></ul></ul><ul><ul><li>No sales commissions </li></ul></ul><ul><ul><li>for placing providers </li></ul></ul>Page
  3. 3. Changing Research Landscape <ul><li>Regulatory and market forces are transforming research </li></ul><ul><ul><li>The spread of CCAs/CSAs are effectively unbundling research </li></ul></ul><ul><ul><li>CCAs/CSAs expedite consolidation of trading counterparties </li></ul></ul><ul><ul><li>Investors expand internal research resources and innovative research techniques </li></ul></ul><ul><li>Research spend becoming bar-belled </li></ul><ul><ul><li>The top firms maintain market share </li></ul></ul><ul><ul><li>“ Long Tail” providers proliferate </li></ul></ul><ul><ul><li>Mid-tier firms squeezed </li></ul></ul><ul><li>Implications </li></ul><ul><ul><li>Greater focus on alternative research </li></ul></ul><ul><ul><li>‘ Best Execution’  ‘Best Research’ </li></ul></ul><ul><ul><li>Managing internal & external research </li></ul></ul>Page
  4. 4. Growing Market for Alternative Research <ul><li>Alternative Research is the fastest growing segment of the research industry </li></ul><ul><ul><li>Alternative Research’s share of total research spend will increase from 14.5% in 2006 to 19.8% in 2011. </li></ul></ul><ul><li>The fastest growing segments are those that do not make buy/sell/hold recommendations </li></ul><ul><ul><li>Economic, Primary and Specialized Research represent 44% of the ____ spending on alternative research. </li></ul></ul>Page <ul><li>Drivers of Growth </li></ul><ul><li>Growth of hedge funds </li></ul><ul><li>Increasing internal research spending </li></ul><ul><li>Innovative new research approaches </li></ul><ul><li>Lower costs </li></ul>
  5. 5. Growth in Primary Research <ul><li>In search for alpha, investors are increasingly using research providers which facilitate primary investment research </li></ul><ul><li>Expert networks, channel checking specialists, web scraping tools, database mining, market research are some of the primary research providers popular with investors </li></ul><ul><li>Integrity evaluates the primary </li></ul><ul><li>research providers and advises </li></ul><ul><li>clients on which firms are best </li></ul><ul><li>suited to client’s investment </li></ul><ul><li>approach, industry/sector focus, </li></ul><ul><li>research style, and budget </li></ul><ul><li>Savings in time and research </li></ul><ul><li>spending more than offset </li></ul><ul><li>Integrity’s fees </li></ul>Page
  6. 6. Increasing Diversity of Research Approaches <ul><li>The alternative research market reflects the multiplicity of investment approaches, including merger arbitrage research, spinoff analysis, distressed securities, short ideas specialists, quantitative modeling, macro analysis, to name a few </li></ul><ul><li>Integrity specializes in tracking the latest trends, and the rise and fall of different providers </li></ul><ul><li>We find the research firms early in </li></ul><ul><li>their life cycles, before they are </li></ul><ul><li>widely known </li></ul><ul><li>Integrity’s goal is not to promote </li></ul><ul><li>specific providers but rather to </li></ul><ul><li>help investors navigate the “dark </li></ul><ul><li>pools” of investment research </li></ul>Page
  7. 7. Distribution of Research Providers Page Note: As of July, 2007. Includes Research Providers pending release in public database.
  8. 8. Integrity’s Products & Services Page Find Best Research Reduce Risk Monitor Research Industry Integrity Research Integrity Research Integrity Research Select® Integrity Research Focus New! Research Needs Assessment Due Diligence Reports Best Practices Analysis (included in ResearchSelect SM ) ResearchWatch Equity Research Industry Outlook
  9. 9. Integrity’s Research Select ® Service <ul><li>Integrity’s flagship service </li></ul><ul><ul><li>Find new research providers, new types of research </li></ul></ul><ul><ul><li>We specialize in non-traditional research and hard-to-find sources </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Find research providers which fit your research requirements </li></ul></ul><ul><ul><li>Tailored to your requirements </li></ul></ul>Page Integrity ResearchSelect ® is a registered trademark of Integrity Research Associates, LLC.
  10. 10. Research Focus <ul><li>Research Focus is a subscription service which reviews the most interesting and innovative types of investment research firms used by institutional investors. Research Focus reports cover all the research firms in each segment — even the most obscure and hard to find. </li></ul><ul><li>Current and Upcoming Reports </li></ul><ul><li>Forensic Research, Earnings Quality & Short Ideas (Published May, 2007) </li></ul><ul><li>US Small Cap Research (Published September, 2007) </li></ul><ul><li>Expert Networks (Published February, 2008) </li></ul><ul><li>Channel Checks / Market Research (Published June, 2008) </li></ul><ul><li>Investment Strategy </li></ul><ul><li>Research Outsourcing (KPO) </li></ul><ul><li>Environmental, Social, Governance Research </li></ul><ul><li>Search-Based Primary Research Tools </li></ul><ul><li>CSA / CCA Trends </li></ul>Page
  11. 11. Retainer Features <ul><li>Access to Integrity’s proprietary database of research providers </li></ul><ul><ul><li>Profile information on over 770 research providers which can be screened and sorted on various criteria including sectors, type of research, geography </li></ul></ul><ul><li>Research Discovery </li></ul><ul><ul><li>Notification of new and interesting research providers, customized to the client’s requirements </li></ul></ul><ul><li>Research Insight </li></ul><ul><ul><li>Periodic commentary and insights from non-traditional research providers </li></ul></ul><ul><li>Research Focus (at higher retainer levels) </li></ul><ul><ul><li>In-depth buyers guides to the most popular types on non-traditional research, including expert networks, channel checkers, short ideas providers, among others </li></ul></ul><ul><li>Significant discounts on overall fees and custom projects </li></ul><ul><ul><li>Discounts increase as retainer increases </li></ul></ul>Page
  12. 12. Retainer Benefits <ul><li>Integrity services = additional analytic horsepower </li></ul><ul><ul><li>Integrity can source non-consensus, non-traditional research far faster than in-house staff </li></ul></ul><ul><ul><li>A typical analyst would need two or three weeks to source/screen/evaluate the research sources that Integrity sources in a week or less </li></ul></ul><ul><ul><ul><li>And often can’t find all the unique sources that Integrity has access to </li></ul></ul></ul><ul><ul><li>Retaining Integrity at the ‘Platinum’ level is the equivalent of having an additional 1.5 analysts </li></ul></ul><ul><ul><ul><li>Typical analyst would be able to complete 19 projects a year (48 weeks/2.5 weeks per project) vs. 30 projects provided by Integrity </li></ul></ul></ul><ul><li>Integrity adds α </li></ul><ul><ul><li>Integrity’s fees are more than offset by unique, differentiated research sources that are not incorporated into mainstream thinking </li></ul></ul><ul><li>Integrity helps maximize commission spending </li></ul><ul><ul><li>Very often the best research is not the most expensive research </li></ul></ul>Page
  13. 13. Integrity’s Research Needs Assessment <ul><li>Finding “Best of Breed” Research Providers </li></ul><ul><ul><li>Customized to your investment style and research needs </li></ul></ul><ul><ul><li>Wide ranging—leveraging Integrity’s internal database of over 1,600 providers </li></ul></ul><ul><ul><li>Geographically diverse—U.S., Europe & Asia </li></ul></ul><ul><li>How it works </li></ul><ul><ul><li>Our analysts work with you to complete a Research Needs Assessment (RNA) </li></ul></ul><ul><ul><li>We utilize our expertise and proprietary database to find research firms that meet your requirements </li></ul></ul><ul><ul><li>We provide a report detailing the firms we recommend, and why </li></ul></ul><ul><ul><li>We keep your RNA on file, and recommend suitable research providers as they emerge </li></ul></ul>Page
  14. 14. How we evaluate research firms Page <ul><li>Quality: </li></ul><ul><li>Research Methodology (Type, Approach) </li></ul><ul><li>Analytic Resources (People, Models) </li></ul><ul><li>Integrity’s Assessment of Quality </li></ul><ul><li>Conflicts: </li></ul><ul><li>Ownership structure </li></ul><ul><li>Affiliated businesses (Asset Management, Investment Banking </li></ul><ul><li>Policies and procedures </li></ul><ul><li>Clients: </li></ul><ul><li>Feedback from former & existing clients </li></ul><ul><li>Types of clients (HF’s, Long Only, Other) </li></ul><ul><li>Servicing/Access </li></ul><ul><li>Competitors: </li></ul><ul><li>Strengths/weaknesses relative to direct competitors </li></ul><ul><li>Pricing </li></ul>
  15. 15. Database of Research Providers Fundamental Information Name Web Site Address Phone, Fax Year Founded Type of Research Business Model Research Executives with titles Research Analysts with sectors & background No. of Customers Product Description News, Recent Developments Types of Assets Covered Geographic Coverage Primary Type of Clients Economic Sector Coverage No. of Companies Covered Analyst Information Business Strength (based on financial estimates & longevity) Product Lines Product Pricing Competition Ownership Structure Compliance Procedures Disclosure Policies Analyst Trading Policies Policies for Research Dissemination Coverage Lists by Ticker Investment Style of Research (i.e., growth, value blend) Sample Research Reports Due Diligence Information Background Checks on Principals Background Checks on Company Site Visits Analyst Compensation Concentration of Revenues Employee Turnover Detailed Review of all Compliance Policies Compliance Staffing and Backgrounds <ul><li>Available for all research firms </li></ul><ul><li>Updated at least once a year </li></ul><ul><li>Increasing coverage based on client requests </li></ul><ul><li>Performance updated quarterly </li></ul><ul><li>Provided only to client commissioning report </li></ul><ul><li>Updated annually, if requested by client </li></ul>
  16. 16. Database Coverage <ul><li>Current Coverage: Over 2,600 Research Firms </li></ul><ul><li>Primarily Equity Research (74%) </li></ul><ul><li>Primarily Alternative (80%) </li></ul><ul><li>Primarily North America (76%) </li></ul><ul><li>Expanding Coverage </li></ul><ul><li>European Research Providers </li></ul><ul><li>Asian Research Providers </li></ul><ul><li>Small and Mid-Size Investment Banks </li></ul><ul><li>Future: Database and Research Tool Providers </li></ul><ul><ul><ul><li>Integrity’s proprietary database covers over 1,700 research firms and other “Softable” providers of research-related information, tools, and analytics </li></ul></ul></ul><ul><ul><ul><li>Integrity uses this database as part of the Research Needs Assessment process and other “high-touch” client requests </li></ul></ul></ul><ul><ul><ul><li>Clients have access to a more limited version of the database; includes over 700 independent research providers </li></ul></ul></ul><ul><ul><ul><li>Coverage is growing daily </li></ul></ul></ul>
  17. 17. Database Coverage Research Providers by Location Source: Integrity Research, as of Jan 2008 Research Providers by Geographic Coverage Source: Integrity Research, as of Jan 2008 Note: Total Sample: 1,230 Research Providers Note: Total Sample: 963 Research Providers Location and Geographic Coverage
  18. 18. Database Coverage Coverage by Asset Source: Integrity Research, as of Jan 2008 Research Providers by Business Model Source: Integrity Research, as of Jan 2008 Note: Total Sample: 963 Research Providers Note: Total Sample: 1,192 Research Providers Asset Class and Business Model
  19. 19. Why Integrity? <ul><li>Unique expertise in evaluating external research providers </li></ul><ul><li>High touch, client-oriented approach customized to you </li></ul><ul><li>Extensive coverage of all types, sizes and geographies of research providers </li></ul><ul><li>Objective and impartial business model </li></ul><ul><li>Experienced analysts to assist in finding innovative new research, review existing providers or implement a research procurement process </li></ul>Page Our goal is to make our clients more successful by adding value to the research process