Credit Agricole Asset Management is planning a new fund which will rebuff external research - commonly thought to be costly and unreliable. Instead, it will rely solely on the firm's team of in-house analysts.
The new fund – European equity research portfolio – was set up initially to act as an internal measurement product for CA’s team of analysts. But it was decided to make the fund live after back-testing showed returns of more than 2% against the MSCI Europe index.
Credit Agricole Asset Management head of UK marketing Chris Johnson claimed the new fund was the first UK portfolio to operate without utilising sell-side analysts.
He said: “The real problem with external research are the recommendations – there are a pathetically low number of sell recommendations. Our own buy-side analysts will almost ignore the recommendations. Sell-side analysts spend perhaps too much time on corporate finance and they are not as objective as they might be.”
Johnson added: “We earnestly hope that those pensions funds who do buy neutral funds in specialist asset classes will look at this fund with interest.”The fund – which will launch next week – will cover around 125 stocks and be 50% tracker and 50% stock-picked by 17 analysts covering 12 sectors.
Credit Agricole’s decision to ignore external research follows on from one of the key findings of the Myners review. Myners criticised brokers’ commissions for a lack of transparency and his comments led to a widespread belief that fund managers would bring research in-house to keep control of costs.
Several senior managers have said that there is a lack of available original research – which is thought to be difficult, costly and risky – and that analysts are too ready to adopt a company’s version of the facts.
Earlier this month a fund management survey by Tempest Consultants found that managers thought analysts were spending one third of their time on lucrative corporate finance work. The survey said that managers wanted analysts’ research to take up about 45% of their time and for corporate finance work to be reduced to around 10%. Out of 84 fund management groups questioned 40% said that they planned to increase in-house research teams in the future.
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