Change in U.K. rules could lead to job changes for analysts
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Some alternative strategies struggle in first quarter following tough 2020
      Close up of Business people shaking hands, finishing up meeting, business etiquette, congratulation, merger and acquisition concept
      Cathay Innovation Partners takes minority stake in Seaya Ventures
      IACPM: Credit managers see stabilizing effect from stimulus programs
      KKR lifts out 3 to focus on clean energy infrastructure
    • Hub International continues buying spree with IBG acquisition
      Callan brings on 2 executives
      Hub International agrees to buy Plan Sponsor Consultants
      Aon names public markets solution leader
    • The J.P. Morgan Chase logo displayed at a branch bank
      J.P. Morgan sells $13 billion of bonds in largest-ever bank deal
      John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      IACPM: Credit managers see stabilizing effect from stimulus programs
      BofA: Most managers bullish on economy, markets
    • Pentegra launches pooled employer plan
      Teresa Hassara
      Ascensus taps MassMutual alum as new FuturePlan president
      Economic Group Pension Services scoops up third-party administrator
      OregonSaves gathers $100 million in assets
    • WTW to cut carbon footprint of OCIO portfolios by half by 2030
      SEC Commissioners Testify Before The House Financial Services Committee
      SEC shouldn’t require ESG metrics – commissioner
      Tracker gives investors insight into progress on social commitments
      Shoppers wear protective masks while visiting an Apple Inc. store at George Street in Sydney, Australia, on June 24, 2020.
      Apple backs SEC mandate on climate disclosure
    • New book culls institutional wisdom from podcast series
      Fearless Girl
      SSGA’s Fearless Girl statue now shattering glass ceiling
      Tangen video
      Norges chief dons chef’s hat to boost employees’ spirits
      Ken Griffin
      Ken Griffin donates $5 million to give Miami students internet
    • Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
    • University of New Hampshire endowment allocates $14 million
      Sen. Elizabeth Warren, D-Mass., listens during a Senate Health, Education, Labor, and Pensions confirmation hearing for Marty Walsh, secretary of labor nominee for President Joe Biden, in Washington on Feb. 4, 2021
      Lawmakers reintroduce climate-risk disclosure bill
      The U.S. Capitol and Library of Congress stand in this aerial photograph taken above Washington
      Senate bill seeks to make U.S. climate-change leader
      Brexit pushes 440 financial services firms to move some U.K. business to Europe
    • Morgan Stanley logo
      Morgan Stanley’s record quarter stained by Archegos collapse
      Man Group CEO Luke Ellis
      Man Group AUM up in first quarter on performance
      Michael Zerda
      LaSalle picks head of debt and special situations
      Susan Ford
      Duff & Phelps brings on institutional business development managing director
    • Corporate plan funding gets a boost from higher discount rates – Milliman
      Evan Siddall
      AIMCo lines up next CEO
      A bank customer takes Danish Kroner banknotes from an ATM in Aarhus, Denmark
      Denmark’s PFA Pension achieves 6.3% return in first quarter
      Ontario Municipal promotes from within for new global equities exec
    • Tufts taps interim co-CIO as new investment chief
      Michael Zerda
      LaSalle picks head of debt and special situations
      Evan Siddall
      AIMCo lines up next CEO
      Susan Ford
      Duff & Phelps brings on institutional business development managing director
    • Paul Morrissey
      Blackstone Growth picks managing director to lead European investing
      Bills of euro, dollar and pound currencies, among others
      Ardian closes latest buyout fund at $8.8 billion
      Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
      Vista Equity promotes 2 to leadership roles on 2 funds
    • CalSTRS indutrial property
      Investors hungry for industrial properties
      Tim Wang
      GLP names co-president of logistics, industrial real estate for China
      Frank Forster
      StepStone Real Estate adds managing director for Europe
      Christine Iacoucci
      BentallGreenOak promotes from within to fill Canadian CIO role
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
      Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • University of New Hampshire endowment allocates $14 million
      Memphis Light, Gas & Water scouting for special situations funds
      Washington State Investment Board earmarks $4.2 billion for 7 funds
      Virginia earmarks $1 billion for 4 managers
    • University of New Hampshire endowment allocates $14 million
      Memphis Light, Gas & Water scouting for special situations funds
      Washington State Investment Board earmarks $4.2 billion for 7 funds
      Virginia earmarks $1 billion for 4 managers
    • Passive Investment Management Services
      Active Extended Global Credit Manager Search
      Actuarial Services
      Investment Management Services
    • Private real estate funds continue rebound
      Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
      Stable value retains edge over money market funds
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
      Vaccination cartoon
      Rallying to meet the ongoing COVID-19 challenge
      Tesla cartoon
      Don’t confuse wealth creation with retirement saving
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      Jake Remley
      Commentary: Inflation expectations vs. reality in the bond market
      Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      In Challenging Markets, Systematic Global Macro Strategies Could Hold Opportunity
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
      watch video
      0:45
      Private funds weathered 2020 turmoil
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Understanding the PEP Evolution
      Divest or engage?
      Innovations in DC: Helping supercharge retirement outcomes
    • POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Private real estate funds continue rebound
      Managed account adoption stalls in 2020
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Understanding the PEP Evolution
      Divest or engage?
      Innovations in DC: Helping supercharge retirement outcomes
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. REGULATION AND LEGISLATION
January 06, 2014 12:00 AM

Change in U.K. rules could lead to job changes for analysts

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Neil Scarth said banning commission-paid research would lead to fewer bank and broker analysts.

    The Financial Conduct Authority, the U.K.'s watchdog for money managers and other financial services firms, this spring will clarify rules around the spending of client trading commissions.

    The FCA wants to “clarify (its) rules that allow investment managers to use dealing commissions — paid from their customers' funds — to acquire execution-related and research goods and services,” according to its website.

    Last October, the FCA announced it would be looking at how investment research is paid for and how money managers spend their clients' commissions in the U.K.'s £5.2 trillion ($8.5 trillion) money management industry.

    Research by the regulator showed about £500 million of trading commissions were spent on funding corporate access — paying a broker, for example, to provide an introduction to the management of a company in which a money manager wants to invest — in 2012, which Martin Wheatley, CEO of the FCA, said should instead be paid for by the money manager.

    Some experts say this pressure will lead to downsizing of analyst teams at investment banks and brokers because they may not bring in the revenue they once did, should the FCA change the way research is paid for.

    “If the regulators banned the use of commissions to buy research, we would go to a priced research market,” said Neil Scarth, principal at Frost Consulting in London. “Research spending would go down and fewer (bank and broker) analysts would be employed.”

    Whether the FCA goes to the extreme of banning the use of commissions to buy research as part of its efforts to put an end to their use to buy “non-eligible services” such as subscribing to newswires — which experts say is unlikely but should be considered — or opts simply to clarify the situation, the analyst industry will be forced to change in some way.

    “Under any circumstances, brokers will have to specialize — the issue has been that, because research is not priced by banks, asset managers have not been specific about what they are paying for,” Mr. Scarth said. “A lot of research that asset managers are receiving they may not have specifically requested and they may not actually use. Highly rated sell-side analysts may become more important and expensive as managers will be able to attribute direct revenue to them in a priced research market.”

    The result, Mr. Scarth said, could be more analysts looking for roles elsewhere. But it also would create more costs for the money managers. He said the consulting firm estimates that, globally, money managers spend billions of pounds on research. “The ability to buy external research creates pretty substantial economies of scale for the system — covering all stocks all of the time in-house is expensive and impractical for almost all asset managers. There is no doubt that asset managers will have to spend more time and money on monitoring the commissions that they spend and to make conscious choices about the research that they buy,” he said.

    Taking advantage

    But the other option is to take advantage of the situation to build in-house capability.

    “There is an opportunity for the buy side to build quality teams relatively affordably, and it would make sense if they could link specific research to fund performance,” said Chris Forbes, CEO at executive search firm Ph.D. Search & Selection in London. “(But) it has not taken off yet.”

    This is one option for a U.K.-based, multibillion-pound money manager.

    “There is an opportunity, and partly ... from changes in research commission, we expect to see more people leaving the sell side,” said the money manager's London-based head of equities, who asked not to be identified. “If research commission is not going to be paid for, brokers will disappear and that will put more onus on us as researchers. There is a real opportunity to start hoovering up bits of talent.”

    It is not just the money managers considering the opportunity. “The bigger pension funds have been weighing up the idea of hiring researchers and analysts on and off for the last two years,” Mr. Forbes said. “None have built up any significant research capability yet, but they have hired a couple of senior managers and strategists from the sell side to look at that for them.”

    On the fixed-income side, however, things are different.

    Experts say while there have been moves from banks and brokers to money managers in the research department, the attraction has waned.

    Godliman Partners LLP, an executive search firm that specializes in fixed-income hires, has kept track of analyst hiring over the past 11 years. “Overall figures to date in fixed income, across all functions, is down 47% over the year to date,” said Rupert Reed, senior partner in London, late last year. “The buy side is going through some sort of crisis of confidence.”

    And the number of moves from investment banks to money managers has declined. According to Mr. Reed, hires from investment banks as a proportion of total analyst roles was 20% in 2013, with seven analysts moving from the sell side to money managers out of a total of 30. That was down from 26% in 2012, and a peak of 30% in 2011.

    “After the crash, there was a surge in hiring — the buy side in part was looking to bring in better analysts to cover critical sectors like financials. The focus is now in portfolio managers. The small exceptions are analysts covering high-yield and emerging markets debt.” Mr. Reed said.

    In early 2013, Pioneer Investments hired two investment bank analysts, Marina Vlasenko and Paul Cheung, to focus on emerging markets and high-yield debt. These hires bring the total number of analysts across the emerging markets and high-yield debt teams to about 10. Ms. Vlasenko joined from Commerzbank and Mr. Cheung from UBS Investment Bank. Infrastructure specialist IFM Investors hired Hannah Lindberg from Barclays Capital in June last year as an investment analyst, focusing on credit research and deal analysis with regards to infrastructure debt.

    A very different world

    However, even if analysts from banks and brokers become available, experts are not convinced they would be able to make the move to the very different world of money management.

    “Historically, there has been low crossover from sell- to buy-side, largely for three reasons: Culturally, the sell side is perceived as being more aggressive or assertive, which doesn't fit well with buy-side practice; the sell side tends to be more trading-oriented than long-term value- or fundamental-oriented — there is a suspicion on the buy side that it is too short-termist; and compensation levels are very different,” said Godliman Partners' Mr. Reed.

    The trend of hiring analysts from investment banks and brokers into the money managers and pension funds in the U.K. is playing catch-up to the U.S., said Mike Karp, New York-based CEO of executive search firm Options Group.

    “The practice (of using soft dollars to pay for research) in the U.S. has been really reined in over the last five years, he said.”

    Related Articles
    EU threat of soft-dollar ban still alive, raising questions for managers
    European agency seeks more disclosure of soft dollars
    Recommended for You
    Standards-of-conduct rules approved along party lines
    Standards-of-conduct rules approved along party lines
    Investors hail SEC guidelines on exchanges
    Investors hail SEC guidelines on exchanges
    SEC passes Reg BI package by 3-1 vote
    SEC passes Reg BI package by 3-1 vote
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    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
    April 5, 2021 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.

    pilogo-NEW
    About Us

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

    Chicago Office
    150 N. Michigan Ave.
    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 © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center