U.S. institutional investors have directed the same amount of equity commissions — nearly $5 billion — to research this year as in 2004, but more of those commission dollars are being spent on securing face-to-face meetings with company management and independent research providers rather than traditional Wall Street research such as stock picks, according to a new Greenwich Associates study.
"In 2005, institutional investors are directing the same share of their equity commissions as they did in 2004, but what they value has changed dramatically over the past several years," Greenwich consultant John Webster said in the report. "In particular, they are less willing to pay for Wall Street's stock picks and studies of individual companies or industries, and much more interested in direct meetings and interaction with company management and sell-side analysts."
More than 35% of commission dollars spent on sell-side research during the last 12 months went to secure access to company management, according to the report. In addition, since 2003, independent research firms have increased their share of institutional equity research commissions to 4.4% from 1.3%, while regional and sector specialists have increased their share to 19.8% from 15.9%.
"Looking ahead, a full 45% of institutions tell us they intend to increase their commission payments to independents, as opposed to just 1% expecting their payments to decrease," John Colon, another Greenwich consultant, said in the report.