Institutional investors plan to use less sell-side research in the coming years, relying more on proprietary in-house work that takes advantage of AI, according to a study commissioned by Thomson Reuters.
The Greenwich Associates report shows that around 70% of portfolio managers, CIOs, analysts, and other investment professionals expect MiFID II regulations and other factors to result in the further “unbundling” of investment research from trading — not only in Europe, but around the world.
With the reliance on investment bank research decreasing over the next 10 years, investors will turn to in-house work and to research from independent providers. They will also integrate alternative data sources more tightly into their investment process.
Those in-house research processes will increasingly include AI. Although only 17% of study participants are currently using AI as part of their investment process, more than half expect to increase the level of AI integration and recruit additional internal expertise, and 40% expect to increase budgets for AI.
"As they invest in new AI and machine-learning technologies, investors will need to obtain more data and information—including alternative data—to identify new ways of finding alpha," says Mahesh Narayan, global head, portfolio management and research, Thomson Reuters.