Q&A: Mehdi Sunderji, Nucleus195
AlphaWeek’s Greg Winterton sat down with Mehdi Sunderji, Managing Member at Nucleus195, a technology company which provides a platform for the buy side to identify and select research providers to assist them with idea generation, to discuss trends in the research consumption industry.
GW: Mehdi, much has been written about how the buy-side is now spending less on investment research in a post-MiFIDII world. What are you seeing from the research providers to adapt to that change?
MS: Research providers are having to step up their game. The research providers that treat publishing research as its own business, not a checked box to gain a banking deal and are really trying to add value to a PM’s investment process, stand out. Maintenance research is no longer sufficient to maintain relevance. Everyone knows that there has been a drop in spending, but we are entering the window now of funds reviewing their budget spends for the year ahead and we may have seen the bottom of content pricing. Every content provider is working on ways to further monetize their content, be it via cheaper trial to start a subscription, joining aggregation platforms or PR campaigns.
GW: Has the implementation of MiFIDII had any impact on how the buy-side is sourcing research and if so, what is changing there?
MS: The buy side directly affected by MiFID II is having to be more discerning on how they access research, knowing they must quantify and justify (internally or externally) every dollar spent. Broker lists have been or are actively being reduced. This raises the profile for IRP’s and ORM’s. The buy side still needs access to research to supplement their investment strategies and is just doing it differently. ORM’s are giving an unprecedented level of access in breadth and depth of research which is bringing efficiency to an otherwise inefficient situation.
GW: Access to research produced by local providers In developing and/or emerging markets has always been less straightforward for money managers. How is technology enabling better connections between the two?
MS: With the emergence of ORM’s this broad-based access is becoming easier for the buy side. They can focus on generating alpha rather than where to get research. To have one portal to access research from different countries, sectors or asset classes, makes life much simpler.
GW: From an operational perspective, what are some of the common traits of research providers which are having success at the moment?
MS: It doesn’t matter how good your research is. If no one is reading it then it doesn’t exist! The successful research providers are getting their research into the hands of the investment professional community and raising their profile along the way. Operationally, distribution is key.
GW: What other changes or developments do you see happening in the research industry in the coming 6-12 months and how will that affect consumption of research from the buy-side?
MS: Over the next 6-12 months the buy side will have a far better handle on what research they value and how to access it. Their access will become much more directed and they will look for conflict free access to a broad research offering.
Mehdi Sunderji is Co-Founder at Nucleus195.
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