Liquidnet’s acquisition of RSRCHXchange is a harbinger of increased focus and attention on buy side research management systems and related fintech. The result is that Liquidnet will now be supporting multiple stages of the investment process through an expanded technology suite, including research aggregation, AI/ML-powered analytics and investment decisioning, and virtual high touch execution.
Once a sleepy segment of the market, research management has seen a steady influx of fintech service providers, digitizing and disrupting all parts of the value chain. I expect, like any technology segment experiencing disruption, that incumbents will pay more attention to some of the new entrants for partnerships and alliances and possible acquisitions.
Due to MiFID II, the European equity research wallet is in a sharp decline, as is the total number of research counterparties. Some buy side firms are absorbing research costs into P&Ls, and there is a greater overall scrutiny of research budgets around the globe. A growing number of US asset managers are even following the example of their European peers and opting to pay for research themselves under MIFID II.
The Rise of Platforms and Aggregators
We observe a reshaping of research production, distribution, and consumption across the globe, but especially in the UK/Europe. Fintech across the value chain is supporting the reinvention of research via an explosion of data, tools, and distribution methods. Asset managers are using machine learning to analyze traditional and alternative data sources more efficiently. And in the UK/Europe, a new breed of research aggregators is offering content in a MiFID II-compliant environment, going beyond simple compliance and improving the client experience.
RSRCHXchange is an example of the types of platforms and aggregators targeting the research marketplace. Others include Airex, Bloomberg, Deep Bench, SmartKarma, and Visible Alpha. My colleague John Dwyer has been thoughtfully discussing the "Research as a Service" model and Smartkarma since 2017.
Research aggregators have emerged offering the buy side access to research via a platform with transparent pricing, usage analytics, and budgeting tools. Firms like RSRCHXchange offer access, storage, and evaluation of research along with budgeting tools, in addition to management of permissions. The research evaluation market for the buy side has become particularly significant in the UK.
The Significance of the RMS
Investment decision-making is getting more advanced. At the same time, we observe dramatic changes in investment research production, distribution, and consumption. The result is that the research management system (RMS) (click the link to see the current VendorMatch listings of RMS systems) continues to be the place where more and more activity is taking place. We call it the nerve center of the buyside front office.
In an upcoming webinar, I project that the RMS will continue to be the core technology solution supporting research management workflow, a point I also recently made in this article. Vendors are adding new delivery methods and upgraded functions to support workflow and data requirements.
The webinar will cover how buy side research requirements are changing and how RMS providers, both existing and new, are upgrading systems and offering new features and functionality to support buy side workflow.