2020 Outlook: Mike Kronenberg, Analyst Hub
Mike Kronenberg is a founder and CEO of Analyst Hub.
What were the key themes for your business in 2019?
2019 was the year that banks took meaningful action in complying with MiFID II and the unbundling of research and trading. One measure included the banks severely cutting back on their trading desks, sometimes eliminating them, and also restructuring their equity research arms. These are two trends that I anticipate will continue into 2020.
These shifts in business strategy have complemented our mission of empowering sell-side analysts to leave the uncertainty of institutional research and start their own businesses. Launched in 2018, Analyst Hub is an independent research infrastructure platform that provides talented sell-side analysts the tools needed to own their own enterprises. Since inception, Analyst Hub has enabled 19 analysts to launch their own businesses.
What trends are getting underway that people may not know about but will be important?
With MiFID II shrinking the research pie, the sell-side model has become more ‘pull’ than ‘push’ resulting in firms reassessing their business strategies. The new transparent pricing model has shown the amount of research available from the large institutions significantly outweighs the buy side’s appetite for it. Because of this imbalance, we are seeing very established, highly recognized firms evaluating if they should exit the sell-side research business completely. Firms abandoning the research business will help their competitors, however large numbers of equity research analysts will be without jobs as we’ve seen happen numerous times this past year. According to Coalition Development, research analyst headcount at the twelve largest investment banks dropped 8% to 3,500 in the first six months of 2019.
What are your customers’ pain points and how have they changed from a year ago?
Over the past year, analysts working for banks have experienced the impact that MiFID II and the shift to more electronic and outsourced trading has had on research. These analysts also have limited visibility into revenue attribution and therefore are unable to truly understand their value. At Analyst Hub, these analysts get to understand their worth through price discovery, while we take care of all the infrastructure tools, compliance and sales reach they need to easily stand up their businesses. Our analysts want to focus on their research, and we enable them to by handling everything else that is required to start their own firms.
Firms are accelerating the buildout of digital transformation strategies.
Expect to see several new entrants in the equity exchange landscape.
CEO sees big potential for financial innovation in digitized assets.
Capital markets will continue to integrate and globalize.
SFTR implementation and the demise of LIBOR will be key themes this year.