Independent analysts take a bite out of investment banks in Asia

Mon Oct 7, 2013 7:28pm EDT
 
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By Saikat Chatterjee and Nishant Kumar

HONG KONG (Reuters) - After 27 years working for investment banks and hedge funds, Hong Kong-based equity research analyst Paul Schulte decided it was time to fly solo.

Carrying a resume littered with big names like Nomura Holdings Inc (8604.T: Quote) and CCB International, the overseas investment banking arm of China Construction Bank (0939.HK: Quote) (601939.SS: Quote), and several others, some of whom no longer exist, Schulte wished he had gone independent sooner.

The independent research industry has started to gain a foothold in Asia. It is already relatively mature in the West thanks to regulations enacted last decade in the United States to end the conflicts of interest between banks and analysts.

Now, a growing number of analysts are trying their luck as independents, selling knowledge and expertise picking stocks, as investment banks have cut back on research departments in the wake of the global financial crisis.

"We are in a very different world," Schulte, a 48-year-old American, told Reuters in a Hong Kong office space that he shares with other companies.

"In the last four years, if you don't see that the research game in investment banks is over, then you are just a fool," said the ex-Lehman executive.

Banks were and continue to be under pressure because of shrinking trading volumes, thinning client lists and regulatory changes restricting their proprietary trading activities.

As a result, there were less jobs and pay in research units, and less chance of career advancement. It became a recipe for disillusion, raising questions over professional values and quality of life for Schulte.   Continued...