View from City Road: Analysts get the thumbs-down

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The Independent Online
THERE are 1,400 analysts working at stockbroking firms in the City, around 200 fewer than there were a year ago. And that still is too many, according to the people at whom their work is directed - fund managers.

For anyone who has toiled away in the City for a measly six-figure salary the Extel Financial annual survey must make depressing reading. None of the fund managers polled said they read all the written research they received and 51 per cent said they read less than a quarter.

They estimate that there is about 40 per cent too much research. Top of the list of superfluous nonsense are overnight notes - briefings of company results produced for the next day - which some fund managers say are hardly worth the paper they are written on.

Fund managers also think there are too many overviews of the UK economy, collated lists of company statistics and surveys of obscure economies no one knows or cares about. They want more in-depth analysis of small and medium-sized companies, pan-European sector research and themed, or comparative sectoral, analysis.

More and more, fund managers are developing their own in-house analytical departments. This is specially true of the Scottish life offices, which have always been pretty sceptical about what they get from London, and large pension groups such as the Prudential and Legal & General.

But the most depressing thing is that fund managers do not seem to care much about independence. At the same time as they are voting Warburg Securities the top analytical firm, they are saying that it is the house that most favours its own corporate clients (closely followed by Barclays de Zoete Wedd, Hoare Govett and Goldman Sachs). It is no coincidence that Warburg headed the mergers and acquisitions league for the first half of this year.

Most stockbroking firms readily admit that the real money is in corporate clients, and that institutions do not pay enough commission income to make research worthwhile. Perhaps analysts should direct their efforts more precisely.