New Asian Association to Promote Independent Financial Research
AsiaIRP, the new Asian Association of Independent Research Providers, was launched November 24 to promote independent research in Asia.
This is the first time independent Asian research houses have had an industry body, as they do in Europe (EuroIRP) and the USA (Investorside). Founder Lucy Carmody says AsiaIRP fills an important gap in the Asian marketplace.
“Independent research is a valuable commodity – particularly now, as Asia is such a focus for global capital flows. Regulators here are still playing catch up to the rapid expansion of recent decades, leading to significant risks for foreign investors, ” she said. “Investors are looking for quality insights into companies, markets and economies to inform their investment decisions in our rapidly changing Asian market.”
The difference between independent and proprietary investment banking research is very clear, Ms Carmody says.
“Basically, if you’re researching the same stocks and markets in which another part of your bank is invested or vested, there’s an inescapable conflict,” she said. “Also, research is often essentially offered ‘free’ as part of banks ‘bundled services’ to their clients. There are some excellent investment banking research products out there but quality has suffered generally since the global financial crisis as resources have been allocated away from proprietary research.”
AsiaIRP Co-Founder, Edward Stockreisser, says that without the regulatory pressure that’s seen the de-coupling of research and execution in other regions, AsiaIRP is even more vital in Asia.
“There’s a growing desire from the buy-side for the kind of quality independent research our members produce,” he said. “But there is still a general lack of understanding about the commission-sharing agreements necessary to gain access to the research. AsiaIRP will be pushing hard for greater understanding and acceptance of CSAs across the region.”
Commission-sharing agreements (CSAs) allow investors to pay for research and trade execution independently.
“When you think about it, it makes a lot of sense,” says Mr Stockreisser. “It’s unlikely that a firm is going to be the best at trading, and also the best at research. The two skills are completely unrelated. So choosing providers of each independently means investors are going to get the best of both worlds.”
AsiaIRP’s founding members include Responsible Research, Lombard Street Research, Asianomics, DSG Asia, BBSP and Institutional Shareholder Services. The organisation will conduct a membership drive from launch day.