With the complexities of today’s financial markets, conducting in-house investment research can be an expensive endeavor for many firms. Outsourcing investment research is increasingly gaining popularity as a cost-effective solution to enhance investment analysis capabilities while allowing companies to focus on core competencies. By leveraging external expertise and resources, outsourced investment research helps generate valuable insights, improve portfolio performance, and add value for clients.
Outsourced Investment Research Provides Specialized Expertise and Global Perspective
Conducting investment research requires specialized knowledge across various asset classes, markets, and analytical techniques. External investment research specialists possess in-depth expertise gained through years of focused experience. For example, an outsourced emerging markets equity research provider can offer valuable insights into regional markets based on local presence and primary research. Additionally, they track global macroeconomic developments, political risks, and regulatory changes – factors that directly impact investment decision-making.
Outsourcing Allows Focus on Core Business While Reducing Costs
For investment managers, research is not a core competence. While some rely fully on internal teams, others find it more prudent to outsource a portion of research needs to external specialists. This allows portfolio managers and analysts to focus on investment strategy and process – areas central to their business. Outsourced teams can provide on-demand support across geographies and asset classes in a variable cost structure, thus reducing fixed overheads related to in-house research. The domain expertise brought by external teams also minimizes the need for training and recruitment costs involved in scaling internal research capabilities.
Customized Research and Flexible Delivery Models
A key benefit of outsourced investment research is the ability to customize services based on specific requirements. For example, a quantitative fund may require specialized risk analytics while a long-short equity fund could seek help with due diligence and idea generation. Outsourced teams collaborate to understand precise needs and deliver tailored research accordingly. They also offer flexibility in delivery – research can be consumed through online portals, feeds to internal systems, or via consulting models. This allows seamless integration into existing workflows.
Enhances Sourcing, Analysis and Decision-Making
The depth and breadth offered by external specialists improves sourcing and analysis of investment ideas. For example, outsourced equity research provides comprehensive coverage of stocks through access to expert networks, primary data sources, and corporate executive connections. The research augments internal efforts by filtering noise and providing actionable insights tailored to the client’s investment process. This enhances portfolio management and risk monitoring capabilities while allowing investment professionals to focus on high-conviction ideas.
In summary, outsourced investment research offers a cost-effective way to enhance capabilities while retaining focus on core investment management activities. With in-depth expertise, global perspectives, customized research and flexible delivery models, outsourcing enables investment firms to improve ideation, portfolio construction, risk management and overall investment decision-making.