UK based Edison Investment Research, which describes itself as an “investment intelligence company”, has just announced it has extended the company’s presence to Israel with the appointment of a senior research director Will Manuel, who earlier founded and led HSBC’s equity research team for Israel-listed companies, to represent the firm in Israel.
Permanently based in Israel, his job is to spearhead Edison’s new initiative in the Israeli marketplace. The firm has said it is continuing to expand its investment research coverage in the healthcare and technology sectors, in particular, as a response to growing demand by the investment community in North America and Europe for more corporate research on Israeli companies.
Edison’s new branch will focus on stocks listed on the Tel Aviv Stock Exchange in particular.
At the same time Edison has just initiated research coverage of two more Israeli companies, BioLineRX and Can-FiteBioPharma, both of which are listed in Tel Aviv and trade on the NASDAQ and OTC Markets respectively.
Biotech company BioLineRX has itself just announced progress for one of its cancer treatments, demonstrating positive preclinical results of its acute myeloid leukemia treatment in a poster at the American Society of Hematologists conference.
Peter Molloy, President of Edison’s US operation and a founding director of Edison Investment Research, said: “We are delighted to welcome Will on board. His deep experience, and expertise, across the Israeli and international markets will allow us to strengthen and expand our international footprint while meeting a very urgent demand for quality research on Israeli companies, ” … “Demand has been growing rapidly for our research from investors worldwide, and there is a clear interest from investors in accessing more information on Israel-based companies.”
Peter Molloy then defined his firm as follows, “With over 100 professionals providing coverage of more than 700 companies worldwide and working in global research teams across a range of sectors and from offices including London, New York and Sydney, we are in an ideal position to expand our research-led portfolio of services to ensure that international investors have access to the highest quality fundamental research to help evaluate investments in international companies.”
Independent outside investment research has often been thought to be an important solution to the age-old problem in the investment business of conflict of interest.
When investment research is produced in-house at an established investment banking firm, the firm’s priorities are usually driven by its underwriting department, which is the source of most of its business income. This can often lead at times to pressure on the views stated by its own investment research analysts, putting it tactfully.
The companies that need the analysis on the other hand, i.e. the institutional investors that buy up most of the share issues put out every week, have historically been reluctant to pay for it. And so the investment industry as a whole has in the past struggled to find a model that works for everybody, providing both guaranteed independence of views and sufficient financial resources to pay for them.
In the good old days investment research was frequently paid for by something called “soft-dollars”, which were buried in the buy-sell spreads of the share prices of an investment company’s trading activities.
When these hidden items were banned in the US, and with the huge compression in trading margins that came with computerized trading technologies anyway, this all went out the window and for a time there was a significant crisis in how, or even if, investment research should be provided and paid for.
After all quality investment research costs a good deal of money to provide and maintain, yet provision of accurate and un-conflicted advice in the long run remains of critical importance to the industry’s overall capital allocations.
Edison Investment Research appears to have found a viable solution, and with more than a hundred analysts on board, paid for by some 350 corporate and investor clients, now has a critical mass that can command both respect and resources. Even so, their conflict of interest policies are likely tested on a regular basis.
One excellent point Peter Molloy makes is that equity fund interest in Israel first boomed with Israel’s emergence as a high-tech economy, at one point accounting for around 8% of the MSCI emerging market index.
However, once Israel was upgraded to developed market status in 2012 many big international banks then pulled back on Israeli equities research coverage as the Israeli market then represented just a tiny share of the index in the giant new ocean in which Israel had become categorized.
Yet within the technology sector the relative scale of Israel’s healthcare and technology sectors compared to its international peers didn’t change at all.
Hence in Molloy’s view the underlying demand for quality research about Israeli stocks among international investors remained as strong as before. Edison is therefore now putting its money where its mouth is and responding to what it states is good demand for Edison research on Israeli stocks.
One smart move Edison has made as well, is that individual investors presently can have full access to all of their research, on the Edison web site , without charge, as a means of broadening their reach. That takes some self-confidence and is certainly to be commended.