Since MiFID II came into effect, European brokers and banks have reduced their analyst teams at least three times more than their US counterparts, according to Substantive Research newly launched Analyst Mapping Service.
This translated into a 12% loss of analysts in Europe compared to a 4% drop in the US between 2018 and 2020. Although brokers increased their analyst ranks in 2020 year to date, it has not outweighed the previous shortfalls.
The research noted that of the analysts lost by US banks over the past two years, 61% covered US markets, equating to 172 individuals. However, they expanded the number of analysts in the UK by 16% or 46 people.
In other words, US banks have shrunk their local teams but continued to invest in their global presence, increasing the number of analysts in the UK who also cover Europe from the UK as well as Asia.
As for European banks over the same time frame, 66% or 121analysts that were dropped covered the US. However, they bolstered their UK analyst teams by 8.2% or 15 individuals. This meant they have consolidated back to their core markets, providing pan-European research coverage from the UK and withdrawing from the US.
From a sector perspective, US brokers grew their analyst teams by 6% in both financials and real estate over the past two years. Sectors that suffered the most were energy which saw a 23% drop in coverage and energy, down 21%.
In Europe, brokers have cut their teams across all sectors between 2018 and 2020, with energy and healthcare being hardest hit, with an 18% loss of analysts in each area.
The downward trend continued in 2020 with healthcare coverage falling 14%, while financials and energy each lost 7% of their analyst teams. IT was the exception, showing a slight hike of 2%.
The Analyst Mapping Service enables buyside firms access to centralised data to track analyst moves, in order to evaluate and benchmark their payments to research providers.
Mike Carrodus, CEO of Substantive Research, said, “The global research market shows no sign of convergence yet. Europe remains committed to unbundling, with asset managers paying for research from their own P&L, but considering a softening of the rules for research on SMEs and fixed income.
He added, “At the same time, the US continues to pass research costs to their client base. However, both sides are working with capped budgets, meaning they are allocating carefully and transparently.”
©BestExecution 2020
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