=DJ Wall Street Looks To India To Boost Equity Research Ops
"In the current marketplace there has been minimal job impact," said Deloitte's Peter Lowes. Still, over time there are likely to be fewer entry-level opportunities in research for fresh MBA graduates in the U.S., he added.
spreading the power around eh? More future layoffs dujour for Mish perhaps? Apoo instead of Hendry Blodgett?
By Anjali Cordeiro
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Wall Street may be nearly 8,000 miles from Mumbai, but analysts and researchers based in Indian cities are playing an increasingly important role in putting together the equity research available on public companies in the U.S.
Several of the largest Wall Street firms have operations in India, which complement equity-research teams in the U.S. by analyzing data, developing financial models, and in some cases doing in-depth research on U.S. and global companies. Some investment banks are tapping this option to trim costs or to expand their research coverage.
Taking the trend a step further, several independent firms operating out of India are separately capitalizing on the need for more cost-effective research in the U.S. They act as third-part vendors that provide equity research on U.S. and international companies directly to investment banks, hedge funds and other financial institutions based in the U.S.
Peter Lowes, leader of the outsourcing advisory group at Deloitte Consulting and one of the authors of a Deloitte survey on the offshoring of financial services, said that large global investment banks are developing their equity-research abilities in India.
"Obviously, costs saving is a major motivator," he said.
Firms tend to save about 30% to 40% of the cost of the research functions moved offshore and compensation for an Indian hire would generally be just 15% or 25% of the salary of someone based in the U.S., according to Lowes.
Still, cost benefits aren't the only reason why some banks are looking abroad.
"Finding these highly specified quantitative skills is getting increasingly hard in certain markets," Lowes said, adding that Indian analysts, who are often of a high caliber, help meet this demand.
Wall Street giant JPMorgan Chase & Co. (JPM), for instance, has about 80 research analysts in Mumbai. According to spokesman Brian Marchiony, a majority of these analysts work on equity research, although some are involved in credit and economic analysis.
The firm does see cost benefits in hiring research analysts in India, but Marchiony says there are other advantages. For instance, many of the Indian researchers do financial modeling and analysis that goes into the firm's equity research on companies based in the U.S. and other parts of the world. That has helped JPMorgan cover a wider range of companies and do more reports that are tailored for specific client needs. Marchiony said that JPMorgan's Equity Research division covered 1,230 U.S. companies at the end of 2005, well up from the 828 covered at the end of 2002. Hiring in India hasn't affected equity-research jobs in the U.S., the firm said.
The teams in India tend to act as an extension of research divisions in the U.S., usually under the direction of senior analysts based in the U.S.
A Goldman Sachs Group (GS) spokesman said that his firm has research-support functions in India that are "integrated with and complement our existing functions around the world." Goldman's Indian team supports U.S.-based analysts by helping to put together and analyze data on global companies.
Similarly, Banc of America Securities also has a team in India, which provides analytical support and completes requests from the U.S. and U.K. for equity research, Securities and Exchange Commission documents, ratings reports and company-related deal information. Given the time difference, the Indian team has the required information ready by the time the firm's operations in the U.S. and U.K. get into gear early the next morning.
Meanwhile, some firms have used outside vendors in India to support their equity-research operations. For instance, UBS (UBS) has outsourced a small number of equity-research-analyst supporting roles to India, according to a spokesman for that firm.
Deloitte's Peter Lowes said that there is an active community of third-party service providers operating out of India, which provide customized products to financial institutions in the U.S. Online filings with the SEC, transcribed conference calls available through the Internet, and publicly available press releases and data have all contributed to making these services possible.
One such vendor, Pipal Research, hires most of its analysts in India and says it can provide quality results at savings of 40% to 60% compared with in-house research services. The firms also have some analysts in Chicago and other parts of the world who can attend important meetings in person.
New York-based agency broker Griswold Co. used Pipal to evaluate the New York Stock Exchange's deal with Archipelago Holdings Inc. (AX). Griswold's Chief Operating Officer Matthew McConnell said his firm has since introduced Pipal to Griswold clients, including institutional money managers, hedge funds, mutual funds and investment advisors. Pipal provides these clients with research data or reports on particular companies.
"It's considered good work and cost effective," McConnell said.
Another research firm, Copal Partners, has headquarters in London but employs a team of analysts in New Delhi. Chief Executive Rishi Khosla says his analysts don't make buy or sell recommendations, but provide detailed written reports and research on companies and industries to clients such as hedge funds and large bulge-bracket firms.
Progeon, the outsourcing subsidiary of Indian software giant Infosys Technologies Ltd. (INFY), provides international banks with services that include in-depth company research. The firm's team of about 200 analysts is mostly made up of engineers, chartered accountants, MBAs and even a few PhDs. "Some have multiple degrees from both Indian and foreign universities," Ramit Sethi, business head of Progeon's knowledge services unit, said in an e-mail.
Still, despite the highly qualified workforce they have to offer, these firms insist that they aren't stealing existing Wall Street jobs. "Analysts are able to go into a lot of detail and make judgments on a better basis because of us," said Pipal Research Chief Executive Manoj Jain. "We haven't seen companies cut analyst jobs because of us."
"In the current marketplace there has been minimal job impact," said Deloitte's Peter Lowes. Still, over time there are likely to be fewer entry-level opportunities in research for fresh MBA graduates in the U.S., he added.
-By Anjali Cordeiro, Dow Jones Newswires; 201-938-2408; anjali.cordeiro@dowjones.com
(END) Dow Jones Newswires
February 13, 2006 13:07 ET (18:07 GMT) |
