Research houses go head to head

Van Eyk Researchwas rated far and away the most influential of all research houses, with 100 per cent of fund managers surveyed saying a van Eyk rating somewhat or significantly influences their inflows and outflows.

Assirttook second place with almost 89 per cent of fund managers surveyed saying an Assirt rating affected business.

Morningstarfared badly, with 50 per cent of fund managers saying a rating from the group did not influence inflows/outflows at all.

Even ‘new kid on the block’ 5Di performed marginally better than Morningstar, with around 44 per cent of voters saying a rating from the group did not affect inflows/outflows.

But the fund managers surveyed were cynical about the role of research houses.

One manager questioned the relevance of independent research houses in an era of amalgamation.

“The gatekeepers at the Commonwealth Bank, the National,INGand Westpac have more control over distribution than any of the van Eyks and Morningstars,” he argues.

“Assirt and Navigator are important as they dictate master fund inflows but Morningstar in particular is irrelevant as fewer people now use it.”

Van Eyk was also rated the most useful of all research houses with just over 56 per cent of fund managers surveyed revealing a van Eyk rating helped them to benchmark their businesses against their competitors.

Morningstar did better in this category, tying with InvestorWeb for a very poor second place with just over 12 per cent of the votes each.

Assirt took only six per cent of the votes.

Interestingly, 12 per cent of fund managers surveyed said none of the research houses were at all useful in benchmarking funds management businesses against each other.

All fund managers surveyed (100 per cent) claim the research behind van Eyk’s ratings somewhat or significantly reflect the strengths and weaknesses of their funds management operations. Lonsdale also fared well in this category winning the approval of 93 per cent of fund managers.

However, once again, Morningstar performed badly, with just over 33 per cent saying the research behind the ratings did not reflect their fund management businesses at all.

The only research house to fare worse than Morningstar in this category was newcomer 5Di with almost 44 per cent of managers saying the research did not reflect the strengths and weaknesses of their business at all.

Van Eyk is also gauged the most professional research house in the country, in terms of integrity of results, methodology and quality of people. Van Eyk was the stand out, with 61 per cent of fund managers surveyed ranking the professionalism of the group as the best.

“Van Eyk has an ethical business model as they are subscriber only, fund managers do not pay,” said one fund manager.

“They have very good people, the best in the business.”

But the group was not without its critics with just over 11 per cent of managers ranking the group’s professionalism as worst.

One manager criticised van Eyk’s process for being unclear.

“They claim the approach is 100 per cent qualitative, but they still require performance figures. The process is not well-articulated and there is too long between reviews of some major asset classes, such as listed property trusts and fixed interest, probably as a result of being understaffed. Many ratings [of our group] are out-of-date.”

Assirt ranked second in the professionalism stakes, but it was a poor second, with just over 17 per cent of voters rating the group’s professionalism as best.

Fans of Assirt said the process of the group was well-articulated and struck a good balance between quantitative and qualitative, but it could also be “unbalanced and inflexible and [take] too long between reviews”.

Morningstar was, again, the clear loser of the more established groups, with around 41 per cent of voters rating the group’s professionalism as the worst and not one fund manager ranking its professionalism as top class.

One manager was scathing in his criticism of the group, saying, “Morningstar has appeared devoid of any true business acumen for some time, resulting in fund managers being critical and distrusting of their commitment to qualitative research”.

Another manager said the group had, “an unethical business model, too much reliance on past performance and too short-term focus on performance”.

On the plus side, one manager praised the people and process of the group.

“[Morningstar has] quality people, a well articulated process, good client service (for fund managers) and good feedback.”

InvestorWeb also returned a fairly lacklustre performance, with all managers ranking the group’s professionalism as mediocre to very poor.

“[InvestorWeb] is costly,” one manager complained, “[they] have a high staff turnover and the overall calibre of current research staff is quite low compared with other research houses.”

Managing director of van Eyk Research, Stephen van Eyk, was not surprised that van Eyk blitzed its competition.

“Ours is the cleaner system,” he said.

“We’re not beholden to anybody. We’ve done retail research and we’ve moved into wholesale, so we’ve had to work harder at portfolio construction. Other people don’t go as far as we do. We have more in-depth research, we carry it one step further.”