Predicting research houses

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Sunday, December 5th 2010, 11:31AM 5 Comments

by Philip Macalister

The recent, poorly-attended, FundSource conference and regulatory changes have got me thinking about the research market in New Zealand. For years it has been moribund with little happening and advisers showing scant interest in buying research from the two incumbents; FundSource and Morningstar. It's odd as years ago these two organisations (known by other names) ran highly successful conferences which were highlight events each year. Yet that must change as under regulation advisers will have to be using proper research. Morningstar has added more resources in New Zealand, even deciding to base its co-head of research, Chris Douglas, in Auckland. This appears to be a sign they are serious about the market again. But Morningstar and FundSource aren't the only players in town now. Lonsec have crossed the ditch and are pretty active in the market. Reports we have had back indicate that its research people and team are being well-received by managers. Van Eyk also have been active through its relationship with AMP (and we understand Perpetual). FundSource is the one which I find harder to figure out. I assume NZX acquired the business from David van Schaardenburg and NZ Funds, for its extensive database. NZX have shown it is a master at owning monopoly or near monopoly data business and extracting lots of dollars out of them. I guess it had the same idea with FundSource but has found it doesn’t have the same sort of monopoly characteristics. From what we can see there is little quant research being done by the house and it is unclear whether that will happen again. Also it’s unclear who is running the show. We have asked repeatedly after learning that the acting head, TJ Singh, left for a role at Ernst and Young. However every request has been rebuffed with an answer along the lines we are not going to tell you. Another thing to throw into the mix is that FundSource has partially changed its logo (well it did on the conference material), however the NZX site and FundSource site still have the old one. The bit which is intriguing is the old one had a star with five pointers – to go with the company five point research philosophy. The new one has a star with six pointers. Maybe we will get six star funds now? However more likely is that NZX will flog off the business to someone like Lonsec and stick to data businesses it can extract lots of dollars from.

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