Rothschild buys stake in UK equity research house Redburn
Anglo-French bank’s move reflects pressure from EU markets rules
FINANCIAL TIMES, George Hammond and Philip Stafford, JULY 17 2019
Rothschild & Co has acquired a minority stake in UK equity research house Redburn, in a rare vote of confidence in European analyst research, which has been hit hard by last year’s introduction of major EU legislation.
The Anglo-French bank’s investment would enable Redburn to “expand both research coverage of new companies and the geographical depth of its distribution, whilst maintaining its independence”, said Robert Leitão, managing partner at Rothschild.
Richard Wyatt, a Rothschild partner, will take over as chairman of Redburn.
The move is further evidence of consolidation in a research industry that has been squeezed by the EU’s flagship markets legislation, the Markets in Financial Instruments Directive II, or Mifid II. The size of the deal was not disclosed.
The rules, which took effect in January 2018, require asset managers to pay for trading separately from research, and has led to asset managers buying less research.
Mr Wyatt said the rules had caused “significant dislocation” in the market and “led to a general contraction in the depth and quality of research coverage. We want to help Redburn capitalise on the opportunities this presents.”
Last year the Edmond de Rothschild group joined Bob Diamond, the former chief executive of Barclays, to buy into Kepler Cheuvreux, betting the French brokerage will emerge as one of the winners from Mifid II.
AllianceBernstein, the US asset manager and broker, bought research boutique Autonomous for a reported $110m in the same year.
A number of asset managers complain that the quality of research has dropped following the introduction of Mifid II and the price they are willing to pay for it has also fallen, squeezing banks’ profits.
The rules were intended to increase the transparency in pricing and break the stranglehold large banks had on the market. However, independent research providers have lost out. Asked to pay for research, many of the largest asset managers and banks now only take their research from the largest and best providers.
A number of the largest asset managers have also made cuts to research budgets, disproportionately hitting independent research firms, a survey this year by the CFA Institute, a trade association, found…
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