Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
April 01, 2002 12:00 AM

Move over Wall Street

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    When the vote on the proposed merger of Hewlett-Packard Co. and Compaq Computer Corp. was still on the line, some big pension funds, money managers and many other investors anxiously awaited the financial analysis of one decidedly non-Wall Street organization - Institutional Shareholder Services Inc.

    When ISS issued its opinion, the news was a big story on the network newscasts of Peter Jennings, Tom Brokaw, et al., and the next day in newspapers around the country. That publicity must have been the envy of Wall Street investment banks and their security analysts.

    The impact of the ISS opinion was another sign, however tenuous, that Wall Street analysts' influence is waning, in part because of questions about the quality of the analysts' work and because of concerns about their perceived conflicts of interests.

    In the H-P/Compaq vote, the influence of Wall Street analysis was replaced at many institutions by that of ISS, normally considered an adviser on matters of corporate governance, not the financial viability of mergers and acquisitions.

    Patrick McGurn, vice president and director-corporate programs, acknowledged that dealing directly with a merger seems unusual for the corporate governance firm. However, he said the firm has been getting more involved in what appears more like the realm of financial analysis for the past 18 months, notably in the corporate fight between First Union Corp. and SunTrust Banks Inc. over the acquisition of Wachovia Corp. in 2001.

    Now, the Investor Responsibility Research Center is considering whether to offer recommendations, not just provide research, on corporate governance issues. Its board could decide in the next three months. Among the issues it is considering are whether it can put together a staff with the competence that would be required to make recommendations, and whether it would come under fire for potential conflicts, rendering its objectivity questionable, according to Linda Crompton, chief executive officer and president.

    IRRC wants to maintain the reputation is has developed for producing quality analysis of corporate governance issues, analysis that hasn't included any recommendations to clients, Ms. Crompton said. It provides executive compensation analysis to corporations.

    IRRC would be a welcome competitor for the marketplace to the ISS monopoly on corporate governance recommendations, and possibly on the new financial analysis.

    Making almost as big a news splash as the ISS opinion was the decision by William H. Gross, managing director, Pacific Investment Management Co., to publicly criticize General Electric Co. for its acquisition and financing strategy and to announce his firm would no longer own GE commercial paper over concern about risk.

    PIMCO is in the business of investing on its opinions, not providing analysis for other investors. But the reception its views received shows a hunger in the marketplace for better investment advice. If possible, investors prefer advice from those without potential conflicts of interests.

    Nell Minow, editor, The Corporate Library, a corporate watchdog resource, believes ISS has always been about shareholder valuation. Otherwise, she asked, "what's the point" of their recommendations? Ms. Minow noted she has a small interest in ISS.

    That the firm's recommendation supporting the H-P/Compaq merger, which won in a preliminary vote count, may have swung the vote is a sign of its influence. The success of these new sources of financial analysis, like ISS and possibly IRRC, will depend not only on the quality and quantity of their recommendations, but also on the willingness of investors, especially institutional investors, to pay for the research.

    Investors have favored Wall Street research so long, and still do, because the true cost of the research is hidden in other fees. So investors perceive it to be free.

    In the long run, you tend to get what you pay for. Investors have to be willing to change their model of obtaining investment research if they want competitors to Wall Street analysts to thrive side by side in the marketplace. Otherwise, investors should stop complaining about Wall Street.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Private Markets
    Sponsored Content: Private Markets

    Reader Poll

    July 29, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    The market opportunity in U.S. residential mortgage-backed securities
    Credit Indices Evolve with Enhanced Data Inputs
    Hedge Funds 2.0: Back to the future
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Crossroads: Politics, Inflation, & Bonds
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit