The Asian Association of Independent Research Providers (AsiaIRP) has launched to promote research independence in Asia and enable research providers and execution-only brokers to compete on more even footing with the full-service investment banks.
The first organisation of its kind in the region, AsiaIRP was founded along the lines of the European Association of Independent Research Providers (EuroIRP) and Investorside in the US. EuroIRP was set up in 2005 and Investorside was set up in 2002.
Like its US and European counterparts, AsiaIRP is a non-profit organisation that aims to raise awareness of independent research and change the perception that research is free of charge, as well as promoting the use of commission-sharing agreements (CSAs) that allow investors to separate payment for research and trade execution.
Edward Stockreisser, co-founder of AsiaIRP, says that in the absence the regulatory pressure that compelled the de-coupling of research in other regions, AsiaIRP has a vital role to play in Asia. “Asia, as a result of the financial crisis, lost many analysts, and some very experienced ones set up on their own. We allow these people to be able to compete with the investment banks, to get paid and also change perceptions about research independence.”
For Stockreisser, it is important to get the message across to investors in Asia that it is possible – and desirable – to get independent advice and research as well as best execution. “You don't have to be paying for research that you don't need, although typically the perception was that research was free. For the sake of investors, we are getting the best price and we are getting impartial ideas that are ultimately free from conflict. Independent research providers don't typically have dealing desks, and execution-only brokers don't tend to have proprietary research, so they fit beautifully,” he says.
AsiaIRP's founding members include Responsible Research (a provider of independent environmental, social and governance research in Asia for global institutional investors), Lombard Street Research, Asianomics, DSG Asia, BBSP and Institutional Shareholders Services.
AsiaIRP intends to push for greater understanding and acceptance of CSAs across the region and will also encourage investors to ask how fund fees are being spent and exactly what their commission dollars are funding. The organisation will lobby to improve the structure and transparency of Asian regulatory and fiscal environments for independent research firms.
Kym Graham, head of Asia-Pacific sales at agency broker Instinet, a founding partner of AsiaIRP, says, “The use of commission sharing and unbundling has undergone enormous growth in other parts of the world and has become the global standard. The problem that we have in Asia is that different countries have different regulators, none of which has particularly strong views on unbundling. That's something that AsiaIRP might be able to help with. The bundled model is very convenient, but investment services can now be consumed a la carte. Significant alpha can be derived from trade execution and independent research providers can provide different quality and different types of research that the investment banks don't have.”
Greenwich Associates has found that 29% of Asian institutions use CSAs and around 20% of institutions that don't currently use CSAs expect to start using them in the next year. Among those that use CSAs, 41% of the their total commissions are paid via CSAs.