New York—Reflecting
the growing prevalence of investment research derived from the internet, we
have added a new sector to our primary research category—Search-Based
Research. Search-Based Research firms,
such as Relegence, firstRain, Connotate, are focused on providing investors
with insights derived from internet search technology. This fast-growing segment has attracted a
number of new entrants over the last few years.
Like most types of primary research, Search-Based firms
provide capabilities which are customized to investor requirements. In this case, investors specify companies,
sectors and/or topics of interest and search driven research firms will set up
processes to mine the web and online services for insights.
Diversity of
Search-Based Approaches
Different firms have different approaches. The spectrum of Search-Based Research ranges
from news filtering at one end to data-mining at the other end. One of the pioneers in this niche was
Relegence, which targeted traders and trading-oriented portfolio managers with
low-latency filtered news. One of the
value propositions was to provide targeted news quickly so that traders could
take positions before the news was fully digested by the market. Relegence collaborated with Credit Suisse’s
equity research group to map industry relationships such as upstream suppliers
and downstream key clients, adding additional value to the company level
filters. Relegence was recently acquired
by AOL Time Warner.
A different value proposition is to exploit the diversity of
the web. This approach is to sift
through local media, trade journals, blogs, non-U.S. content and other obscure
sources to find relevant information which has not been picked up by the mainstream.
Examples include firstRain, Monitor 110,
and Collective Intellect. firstRain
primarily focuses on the buy-side, targeting analysts and research directors
rather than traders. firstRain is a
California-based firm which has begin focusing on the investment community over
the last few years with growing success.
[Note: Sandy Bragg is a member of firstRain’s advisory board.] NY-based Monitor 110 launched its service two
years ago, and, like firstRain, is primarily targeted to the buy-side. Collective Intellect, which is based in
Boulder Co, has a more diverse client base including pharma, consumer goods as
well as the sell side.
The other end of the spectrum is to use the web for data
mining. Connotate Technologies focuses
on setting up customized spiders for clients, and specializes in data mining applications. An example would be collecting airline fare
information from online travel sites to determine whether a price increase is
sticking. The grand-daddy of this
approach is Clear
Forest, which offers
enterprise level applications for government agencies as well as the private
sector.
Growth Drivers
A key driver behind the growth of primary research is the
increased hiring of research staff by investment managers. We estimate that the buy-side is spending is
$ billion and shows no signs of slowing. Hedge funds are another growth engine. Hedge funds value research which is not
widely distributed and the customized nature of primary research appeals
greatly. The largest segment of primary
research is the expert networks such as GLG, Vista Research, Clinical Advisors,
Nitron. Channel Checkers, such as OTR,
Farmhouse, Retail Intelligence Group, are also popular forms of primary
research. Also included in the category
are firms specializing in access to company management and market research
firms which specialize in performing custom research projects for investors.
By adding Search-Based
Research to the primary research category we are acknowledging the
fast-changing nature of investment research, as the market continues to find
new and innovative ways to deliver investment insights.
Posted at 06:36 am by Sanford (Sandy) Bragg
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