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Special Report

Impact investing


Fund managers berate lack of broker focus

EUROPE – Fund managers have voiced their strongest concern yet over the role of analysts in investment banking work, with some 86% saying they felt that analysts’ involvement in corporate work diluted their institutional focus, according to this year’s Reuters Survey of European Smaller Companies.

The survey, commissioned by Reuters and executed by Tempest Consultants, features responses from 84 fund management groups representing $65bn worth of investment in European smaller equities.
In its findings, Tempest notes that fund management groups now believe analysts spend up to a third of their time on corporate finance and new issue business.
The survey says fund managers take a particularly ‘dim view’ of this perceived time allocation.

By contrast, fund managers believe broker analysts spend just over a quarter of their time on fundamental research and less on company visits – both of which they would like to see double in priority.

Consequently, fund management groups say they are unlikely to increase the number of broker teams they deal with, and some 40% say they intend to increase their own in-house research efforts.
The report notes that such an increase in buy-side research may make it more difficult for brokers to add value to clients through quality research and service.

The report, however, finds an upswing in the number of securities houses increasing their focus on European small caps over the last year.
Of the top ten broker firms ranked by investment groups in this year’s survey, five had significantly increased their small cap coverage over the last 18 months.

The top five broker houses for 2001, according to the survey were, in order – Deutsche Bank, Schroder Salomon Smith Barney, Cazenove & Co, UBS Warburg, Merrill Lynch.

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