Tag Archives: Investment Research Outsourcing Services

Global investment research plays a critical role in shaping financial strategies and decisions across the world’s capital markets. As global markets continue to grow and the economies of the world become more interconnected it has come to be that quite advanced and sophisticated global investment research techniques are needed by institutional investors, asset managers and hedge funds especially. Such investors are accustomed to using developing techniques that involve macroeconomic analysis, sector knowledge as well as security-specific analysis in making investment decisions in very uncertain and dynamic markets.

Macroeconomic Dynamics and Geopolitical Influences

Investment decisions can chiefly be influenced by the external environment and the risk factors associated with it.

COVID-19 Influence on Inflationary Trends

The COVID–19 outbreak significantly contributed to rising inflation all over the world and by the year 2020 inflation stood at 8.8% the highest in a couple of years. As a result of the inflationary pressures, the central banks resorted to very forceful monetary policies, with that of the US entering as high as 5.25%-5.50% rate in the year 2023.

For Emerging Markets

Rising inflation and the changes in policies led to a great deal of capital flight from emerging markets. This situation has resulted in depreciating currencies, recession, and low growth rates in the respective areas.

Disruption in Trade Activities

Lockdowns imposed on the outbreak of the pandemic disrupted trade activities greatly, revealing the extent of global business operations. Close to these trade wars are causes like the one between America and China which also affect investment decisions among other issues in sectors like technology, energy, and agriculture that face tariffs that threaten business.

Rationale of Continuous Tracking

The members of the global investment research teams should also ensure that they monitor current economic developments, as well as changes in the relevant policy environment towards the future. It is necessary to know how geo-political factors impact in order to devise investment plans that would succeed.

Sector-Specific Research Identifying Trends and Opportunities

There are various trends in opportunities with regards to the different sectors. Some of them are:

Trends and Opportunities in Global Investment Research

Trends and Opportunities in Global Investment Research

Renewable Energy

In addition to the above, the renewable energy market is forecasted to grow in value to 2.15 trillion dollars by the year 2030 with the compound annual growth rate (CAGR) being 10.6%. This area has thus become a principal area of focus for a study on the trends of investments due to the changes towards the use of energy in a more sustainable manner.

Emerging Sectors AI & Biotech

Artificial Intelligence and Biotechnology are making their way towards convergence owing to the technology in these fields. The value of the AI industry is expected to reach $407 billion by 2017, given the advances in machine learning and intelligence of various systems.

Investment In Clean Energy on The Rise

In reaction to these changes in perspectives, several nations have been providing crucial government returns on investment and the corresponding infrastructure costs for solar and wind, which has led to the clean energy drive seeing huge funding. In the year 2022 alone, the amount of money spent on clean energy projects out of all investments reached over 495 billion dollars, which indicates that investors have very positive expectations concerning this business.

Global Investment Growth

Increased investments in renewable energy, artificial intelligence, and biotechnology, among other levels, further affirm the global growth in investments. There has been a trend whereby most of the growth in such sectors as investment has been driven by technology and sustainability.

Areas of Focus for Researchers

In the case of growing industries, global investment research teams are looking at the emerging industries, looking for the key players, their power and the barriers in the respective markets. This in turn puts most equities on an attractive investment climate for those who are concerned.

Quantitative Models and Advanced Data Analytics

Today quantitative analysis and applied big data science in global investment research are essential components of any investment research conducted on a worldwide scale. In this respect, financial institutions have greatly utilized market models to assess future market performance. On a louder note, the global alternative data trends market in the financial services industry is expected to grow at a CAGR of 50.6% between 2024 and 2030 owing to technological breakthroughs in machine learning and artificial intelligence.

Hedge funds have always been at the cutting edge as far as the development of sophisticated algorithms to engage in systematic trading optimally and more recently in high-frequency trading (HFT) which takes advantage of arbitrage opportunities. These funds apply sophisticated models to analyze huge amounts of data including but not limited to historical prices of stocks, earnings data, and even social network sentiment. Studies on the subject have found that firms employing AI-based trading strategies outperform traditional strategies by about 25%.

The Role of Alternative Data in Decision-Making

Global investment research has experienced a shift with the incorporation of alternative data within its pyramid structure. Information that is obtained from various sources including satellite, web browsing, and geographical information can give current updates enabling better decision-making for global investment research. The worldwide market for alternative data is predicted to expand at a CAGR of 52.1% between 2023 and 2030. This is because these insights assist investors in developing strategies utilizing consumer insights, threats to their supply chain as well as more intense levels of environmental risk than ever before.

For example, satellite images have enabled the modeling of dicot yield in regions, thus giving an alert when potential threats to food security arise. It can also extend to analyzing the social media sentiment towards the target brands or sectors like retail and technology to explain investor confidence.

The Future of Global Investment Research

The future of global investment research is undergoing a significant transformation driven by technological advancements and evolving market dynamics in every sector.

The Future of Global Investment Research

The Future of Global Investment Research

Technological Advancements Shaping Research

AI will transform capabilities in research, especially in the speed of making resultant decisions. Advanced Data Analytics tools will go beyond and widen the research undertaken enhancing the precision and insight obtained.

Introduction of ESG and Other Data

Environmental, Social and Governance (ESG) factors will increasingly influence the investment decision-making process. The use of alternative data will be part of the analysis process to enhance the existing traditional methods.

Market Development and Projection

The Market is forecasted to Reach In the year 2024, the size of the global investment research market is estimated to be worth $19.4 billion. Estimation of Future Business Performance Forecasted to have a Compound Annual Growth Rate (CAGR) of 6.2% in the proceeding five years.

Factors for the Successful Future of Investment Management Companies

Agencies which successfully employ sophisticated technologies with updated tools and methods, will be in a position to tackle the challenges of the world. In an information industry where information is time it is hard to survive for firms that remain in stagnation.

Magistral’s Services for Global Investment Research

Magistral Consulting provides a complete range of global investment research services intended to facilitate value-added investment decision-making throughout the investment process. Our research capabilities are ranked by sectors, markets, and geography so that those investment firms that count on us will always have the right insights for their investment strategies. Below you can find some of our services for global investment research

Industry Research

Magistral’s thorough Industry Research supports global investment research and enables investment firms to gain deep insights into industry movements, market features, and competitive environments. We evaluate the drivers of growth, regulatory changes, new technologies, and general economies to deliver market-ready solutions. Be it finding the right market or going into the depths of the sector, our industry research surfacing threats and opportunities for investments allows providing all with statistics-centered choices in foresight of practice.

Company Profiling and Competitive Landscaping

Our Company Profiling and Competitive Landscaping services include an in-depth understanding of a company and its place in a given industry. Magistral, for instance, assesses the financial status of target companies, their operational effectiveness, market presence, and strategic movements in comparison with other participants.

Preparing Investment Memos

For global investment research, we also assist in preparing investment memos. More specifically in composing Memos where all the relevant information collected during research is compiled, analyzed, and presented clearly and concisely. Such documents include industry analysis, company business and financial plans, investment risk levels, and other more relevant information that gives investors an awareness of the opportunities in the investment.

Research Incoming Pipeline

Magistral also assists investment firms in enhancing their deal flow through the Research Incoming Pipeline. The potential investment opportunities are examined and screened according to a set of criteria such as business financial strength, market share, growth capacity, risks, and others, by our professional team.

 

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

Alternative data refers to non-traditional data sources like satellite imagery, social media sentiment, and web analytics. This data provides real-time insights that traditional data may not capture, allowing investors to better assess consumer behavior, supply chain risks, and environmental factors, leading to more informed investment decisions.

Regulatory frameworks, such as MiFID II in the EU, have changed how investment research is consumed and paid for. Additionally, regulations in emerging markets like China and India are continually evolving, affecting capital flows, taxation, and corporate governance. Research teams must stay updated on regulatory changes to ensure compliance and mitigate risks.

The future of investment research lies in the growing integration of artificial intelligence, big data analytics, ESG considerations, and alternative data sources. Investment firms that adopt these technologies and approaches will be better positioned to manage the increasing complexities of global markets and stay competitive.

Investment Research Outsourcing

Multiple Investment Services firms like Investment Banks, Private Equity, Venture Capital, Hedge Funds, Family Offices, and Asset Management firms are looking to outsource investment research in the post-Covid 19 pandemic era. The article describes the concept of Investment Research and the ways to go about outsourcing the process.

What is Investment Research? Investment Research Definition

Investment Research and Analysis or Investment Analytics combines multiple activities related to investments in Equity of companies (both public and private) and other financial instruments.

The major activities related to securities research are equity research, Fixed Income and Credit Research, Index and Quantitative Research, and Macroeconomic Research.

Another important aspect of Investment research is the support services towards Corporate Finance and Valuations. It includes activities like Investment banking support, Valuation support, business information services, and Private Equity and Venture Capital support.

Investment research also comprise of data governance-related activities like outsourced CFO.

Is Outsourcing a Good Idea?

Investment Research Outsourcing is fast catching up. Here are the trends that are leading to expending the concept of Investment Research Outsourcing

The pressure to lower costs: Investment Banking is not what it used to be. The digital world has shrunk the opportunities to make big dollars brokering big deals or IPOs. This has also led to pressure on costs. This leads to outsourcing non-critical jobs to low-cost countries like India.

Diversification on investment types: An Investment manager has way too many asset classes to handle today. It’s not only limited to public equity but now has diversified into private equity, real estate, cryptocurrencies, commodities, REITs, Index-linked instruments, and many other asset classes. If the investment team is small, it’s difficult to have a combination of skillsets to provide a holistic solution to their clients. As outsourcing vendors understand Investment Research dynamics well, Outsourcing helps in bridging the skill gap. Outsourcing vendors also have access to multiple investment research tools.

Information Sources and Databases: With the proliferation in investment type, also gone up is the requirement of multiple databases for varied data points. It’s a costly affair to maintain access to multiple databases in-house. Investment research tools are also used to fine-tune the data and information.

Confidentiality: There is pressure to keep all information confidential. An outsourced team doing due diligence is perfect, as it leaves no trace of who the client maybe, that is doing the due diligence. An analyst can talk to potential target with or without introducing the client.

Quality: Outsourced players have better quality than the in-house team. The outsourced team typically is bigger and has done similar tasks multiple times before. In the process, they usually create an information bank or templates that are ready to use. They also sit on the hoard of best practices for multiple situations. If the outsourced player has its knowledge process well documented, they are in a better position to offer work quality.

Effective Supervision: When internal teams are working on an analytical project, it’s difficult for a partner to take time out to get into the details of data, information, and analytics therein. But with an experienced outsourcing player, there are multiple levels of supervision, governance structures, and quality control processes to establish an error-free work every time.

Variable Costs: Outsourcing agreement can be changed to pay for hours consumed or assignment outsourced other than hiring a virtual investment analyst. This brings immense flexibility in terms of costs. An investment firm can hire only for the assignment and then go back to the original structure, once the job is done. This is very useful for smaller investment teams and firms with partners only, who need an on-demand investment research analyst. An investment research team can come together ad-hoc and then could be dismantled when the job is done.

What jobs can be performed with Outsourced Investment Research? Outsourced Investment Research Activities

There are multiple elements of the Investment Research Process, that could be potentially outsourced:

Equity Research: Equity Research is the most voluminous work as Investment Banks usually outsource quantitative investment research. Equity research typically revolves around the fundamental analysis of the set of stocks that are tracked regularly. A report carrying all the developments and valuation-related matrices is published once a quarter for every stock covered. These Investment Research Reports are updated periodically. The format of these reports is customized and can be changed as per the client’s preferences. Outsourcing this activity allows the in-house team to cover more stocks than it would have covered otherwise. Also, this task could be broken into multiple streams before outsourcing, say preparing the DCF model, updating the model periodically or analyzing the investor calls from the company’s management. Investment Research Analysts work as an extended offshore team to the in-house team. Investment research software aids the in-house tech capability.

Due Diligence of Private and Public Companies: Due diligence is time-consuming and requires huge efforts. Sometimes the due diligence can last even for a year analyzing tons of data and information. A support team that takes up the requests and delivers as promised increases the efficiency and makes sure that due diligence is completed in prescribed time limits and suitable valuations. It also makes sure that the asset generates the intended value for the investors after the investment.

Fund Administration and Investor Relations: There are multiple activities of fund administration and investor relations that could be outsourced like Newsletters, MISs, Expense Tracking, Accounting, Company Registration, and multiple other similar activities. Investment Research management software or Investment Research Platforms are used to coordinate multiple related activities.

Outsourced CFO/ Outsourced CMO/ Outsourced CPO for portfolio companies: This is very relevant for Venture Capital and Private Equity firms that go into the nitty-gritty of operations for portfolio companies. Rather than hiring a full-time Chief Financial Officer, Chief Marketing Officer, or Chief Procurement Officer, one can just outsource these activities and pay for the services when needed. Some activities related to lead generation in sales and business development could be outsourced as well. Outsourced CFO is the most popular option.

Research and Strategy: Research and Strategy projects are generally run parallel to the main operations. There are instances of hyperactivity followed by the lull in terms of number of the projects and initiatives. Outsourcing these keep the focus of operations’ team on the day to day operations and an unbiased view of the strategic potential from someone who has a fresh eyes perspective on things.

Financial Modeling: Financial modeling is more of an art than science. Asking the right questions and then capturing the details is a skill that is honed over time. Most internal teams are not skilled in these activities as it may be one-off activity once in a while. An outsourcing entity has ready templates and has done these over time to know the exact pain points and the right questions for the perfect financial model. Investment Banking Research Analysts are well versed with multiple aspects of financial modeling.

Deal Origination: Deal pipeline should be continually populated for a Private Equity or a Venture Capital firm to run like well-oiled machinery. Most activities related to deal origination can be outsourced effectively. It can again be broken into sub-activities before outsourcing and then outsourcing the non-critical jobs. Decision making related to investments can be kept in-house but company profiling, list generation, initial due diligence can be outsourced. Once the investment decision has been taken parts of detailed due diligence could be outsourced as well.

How to Go About Outsourcing Investment Research?

There are multiple investment research companies and investment research firms which assist in outsourcing investment research services by offering virtual investment research analyst. They are varied in size and geographical presence. There are multiple investment research firms in India, that offer low-cost advantages.  You can make a list of suitable vendors either from Google search, references or when a sales leader reaches out to you. The very first step towards establishing suitability is to ask for past work samples. Once you have had a look at the work samples and they appear good quality, ask for a proposal for a pilot project. A pilot is a smaller project that is undertaken before outsourcing the bigger chunk of the operations.

A pilot project should ideally last from a week to a quarter. This should give you ample time to experience the vendor’s capability and skills. Once the pilot is successfully completed, a bigger engagement should be negotiated. Also, make sure the price that the vendor offers is competitive for the quality of services offered.

Magistral Consulting has helped dozens of buy-sides and sell-side firms in outsourcing their investment research operations. It is one of the leading Investment Research companies in India with the capability of performing global investment research. It is a one-stop-shop for all requirements of investment research and analysis. It has delivery centers in India that give it a cost advantage with sales offices in all the major cities across the world. To drop a business inquiry with Magistral, click, https://magistralconsulting.com/contact/

The author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsulting.com for any queries. For further details on Magistral and its services, visit www.magistralconsulting.com