Asian institutional investors are prioritising sell-side research and advisory over execution services in volatile markets, while also cutting back their number of sell-side relationships, according a new report from consultancy Greenwich Associates.
The firm’s ‘Asian Equity Investors Study’ revealed that, among the largest trading institutions in Asia, the average number of sell-side relationships fell to 20.5 in 2008, from 24.5 in 2007.
The research also noted that a sharp decline in portfolio values and stock prices had shrunk the pool of institutions’ equity brokerage commission payments. Within these diminished pools, the proportion allocated to research, sales coverage and advisory services jumped 11 percentage points in 2008, to 66%, according to the study. This came at the expense of trading coverage and agency execution, which now accounts for to 26% of total commissions, down from one-third a year ago.
“The reversal of this trend does not mean there is less desire for superior execution, but rather that, in times of unprecedented market turmoil, the need for timely insights and access is even greater and the opportunity cost of not securing them is not something that investors want to risk,” said John Feng, consultant, Greenwich Associates.
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