Wall Street research is driven by commissions
Wall Street research departments have dramatically downsized resulting in an estimated 50% reduction in analysts lost over the past year. Wall Street research isn’t driven by the best investment ideas and opportunities; lately, it’s driven by getting get paid by trading volumes. Trading volumes are dramatically down and many small and mid-size brokerage firms will continue to cut overhead and reducing staffs.
Wall Street research departments have dramatically downsized resulting in an estimated 50% reduction in analysts lost over the past year. Wall Street research isn’t driven by the best investment ideas and opportunities; lately, it’s driven by getting get paid by trading volumes. Trading volumes are dramatically down and many small and mid-size brokerage firms will continue to cut overhead and reducing staffs.
- Merrill has suffered dramatic turnover since being acquired by B of A
- Cowen& Co was recently acquired by Ramius had reduced analyst headcount
- UBS has reduced staff amid mounting losses
- Nomura has cut banking and analyst staff, including many who were part of the contingent acquired from Lehman (mainly in Asia)
- Rodman & Renshaw had laid-off analysts and 20% of staff upon the demise of the PIPES market which is slowly coming back
- Fidelity laid-off 22 research analysts, at its core FMR Co. mutual funds unit
Bear Sterns’ demise doomed the financial market putting many analysts on the street pre and post being acquired by JP Morgan and Lehman Brothers Holdings Inc’s bankruptcy upended the Wall Street investment banking model (although some analysts were picked-up by Barclays). Smith-Barney (Citicorp) has been spun off with a pending merger with the brokerage unit of Morgan Stanley. Even, Goldman Sachs laid-off a number of analysts. Fulcrum Global Partners founded with much fanfare in 2001 was an alternative to traditional Wall Street research, But, Fulcrum shut its doors and resigned from the National Association of Securities Dealers. Despite reams of press coverage and an initially warm reaction from “buy”-siders, Fulcrum found that clients simply weren’t willing to pay up for premium research. B of A also suffered a major reduction in the quant (many Merrill) area as have most major financial related institutions. Meredith Whitney, whose bearish calls on Citigroup and other banks earned her a large investor following, left Oppenheimer & Co to launch her own research boutique. JM Dutton, a major provider of independent research closed its doors, as the current market environment prompted smaller public companies to obtain research coverage and is no longer in business. Consequently, Dutton’s 18 analysts – most of whom have decades of sell-side or buy-side research experience found themselves out of work.
Almost all firms have retrenched, reduced analysts and institutional traders. The list of I-Banks reductions could go on and then more; but until the capital markets open up, not much will change.
