Rapid Move to Global Product
While it took years for the sellside and buyside to grapple with pan-European sectoral research, the leap to a global product seems to be happening almost overnight. Globalisation, multinational mergers and overall consolidation in their own circles means that fund managers no longer want to view their investment worlds only through a regional prism, but via a world-wide spectrum.
Producing the weighty global tomes is not an easy task. Fund managers know a cut-and-paste job when they see it and they are demanding truly integrated reports, full of facts and figures that create a unified view of an industry. Communication and co-ordination are paramount, but investment houses also must have scale and global reach.
It is no surprise, then, that the usual European and US houses are topping the global research charts. In the latest Institutional Investor Magazine global poll - the only one of its kind - Morgan Stanley was in the number one spot, followed by Goldman Sachs, Merrill Lynch, UBS Warburg, Salomon Smith Barney and JP Morgan, which has since been taken over by Chase.
As Charles Lambert, co-head of global research at Merrill Lynch with Deepak Raj, says: "You need a global footprint and to have the resources to be able to put all the material together. The logistics become easier as you move up the learning curve, but I do not think the small- to medium-sized houses would be able to do it."
John Hoffman, director of global equity research for Salomon Smith Barney in New York, agrees, adding: "It has really taken off in the past year. Fund management groups seem to have just jumped from the euro and the introduction of pan-European sector research to wanting global sector research. Instead of investing in Europe, not including UK funds, they are looking at Asia Pacific and perhaps Latin America. They do not want to receive seven messages from our different regional salespeople about the different companies. They want all the information to be in one report."
Lambert says he knew the tide was turning when Daimler Benz took over Chrysler. "We had to connect up our auto analysts and put together a definitive piece of research on the merger. Currently the number of funds that are run on a truly global basis are small, but it is increasing rapidly. It also makes sense as industries and companies are becoming borderless," he says.
Even the smaller- to medium-sized houses are looking at the sectors on a global basis. Robert Murphy, global analyst for Gartmore, adds: "While more and more of the larger fund management groups are wanting peer group analysis across regions, the smaller investors are also interested. They will not invest in Nokia until they have a look at what Motorola in the US is doing."
In order to meet this growing demand, a new breed of manager has emerged in brokerage houses - the global co-ordinator. It is not always an enviable role. As one analyst put it: "It can be very difficult getting all these people to work together on the human level. You often have strong personalities and the rewards may not be obvious when you ask them to broaden their workload. However, it is the co-ordinator's responsibility to convince the analysts that adding a global dimension will also complement their regional coverage."
Overall, the global co-ordinator's job is similar to a film producer's. He or she must ensure that everything is running smoothly, all the right parties are talking to each other and the pieces can easily be put together. On a day-to-day basis, this means helping analysts identify the important themes that underlie an industry, as well as assist in marketing those ideas to clients. …