Due to the decline in buy side’s reliance on sell-side investment research and money managers’ increasing interest in automating and aggregating research, the buy side will increase its expected $586 million on research technology this year by 22% a year to $1.1 billion by 2010.
Buy-side asset management firms are increasingly interested in aggregating internal analysis, broker research, independent research, outsourced analysis and other research tools. These findings are according to a new report from TowerGroup.
Spending in North America will be particularly strong, more than doubling from $372 million this year to $692 million, representing annual growth of 22% a year. In Europe, buy-side firms will increase their current $144 million investments on research technology to $257 million, or 20% a year, and in Asia, the spending is estimated to rise 20% a year from $70 million in 2007 to $125 million in 2010.
TowerGroup said that automating research will become more common at buy-side firms, driven by advances in Web-based technology, specifically extensible markup language (XML) and extensible business reporting language (XBRL) tagging, application service providers, Web 2.0 and portal technology.
TowerGroup believes that asset managers will either assist or replace analysts and researchers with automated systems. The consulting firm also believes that more efficient, streamlined research will result in better fund performance.
The TowerGroup report, “Is ‘Automated Research Technology’ the Way of the Future for the Investment Research Business,” is by Dushyant Shahrawat, investment management practice research director.