Small Asset Managers Grapple for Research.

Changes to how small and mid-tier asset managers obtain research may be coming, as soft dollars continue to be scrutinized and execution costs are being unbundled, according to panelists at a recent New York AQ conference, "Navigating the Research Marketplace."

In the past, research has been viewed as cheap, but that notion is changing.

"No one ever bothered to measure the value of research, and no one knew the implicit cost," said Harold Bradley, CIO at the Kauffman Foundation.

There are a few trends occurring as to how smaller asset managers will get research. One is that they will build their own in-house research team. Another is that they will increase their use of independent research shops. But because of asset managers' move to become self-reliant at research, some independent research houses will fold or merge, said Michael Mayhew, co-chief executive officer of consultancy at Integrity Research Associates of New York.

Smaller asset managers are following in the footsteps of larger asset managers, such as Boston-based Fidelity Investments, which has been building its internal research team for some time. Fidelity stated it hired 90 stock analysts in 2006, and as of last November it had 300 equity analysts and 90 who followed fixed-income markets.