Buy-Side Firms Stepping Up Their Use of Broker Research, TheMarkets.com Says

The economic recession is apparently mere background noise to TheMarkets.com, where the number of reports accessed in October was double that of October 2007 and revenue has grown 30% this year so far.

"Despite the carnage affecting most of our industry — I'm knocking wood — we've been largely spared," says CEO David Eisner. "We had our biggest sales of the year last month. We continue to hold our breath, but so far, our business has held up well."

TheMarkets.com provides sell-side, broker research to money manager buy-side firms. (Its chief competitor, Eisner says, is Thomson Reuters.) About 2,200 firms, including hedge funds, private equity funds, and traditional money management firms, subscribe to the service for a negotiated annual fee that's typically in the hundreds of dollars per month per user, paid in soft or hard dollars).

Uncertainty in the markets is driving new business to TheMarkets.com. "We've noticed in the last 45 days a dramatic increase in the number of reports accessed and data lookups on our site," Eisner says. "There does seem to be in this very volatile time an insatiable need for information and data."

Eisner's observations are surprising in light of the credibility hit the brokerage industry, especially the large broker/dealers, has taken lately. But although Eisner acknowledges that the large brokers have lost money and the credibility of their management might be under question, "the credibility of their research hasn't been questioned the same way it was five or six years ago [when Eliot Spitzer criticized many of sell side's research departments for being too closely tied to the investment bankers], so I think we're not seeing any drop-off in the usage of brokerage research credibility," he says. "In fact, there's some indication that money managers' internal research departments are being not expanded or they're contracting, therefore there will be a greater reliance by the money management community on external research."

TheMarkets.com recently added an email alert service that notifies subscribers when companies they care about have been upgraded, downgraded, or undergone a ratings change. It also added Meeting Tracker, which helps money managers organize their meetings with corporate managers and note how valuable each meeting was afterward. TheMarkets.com also plans to extend its service to those who don't have trading relationships with the brokers.