The sell-side equity research model remains a business challenged by external factors that command a renewed approach to investor relations.  Regulations such as MiFid II in Europe, the rise of passive strategies and associated shrinking of active management, as well as the in-housing of the research function by many asset managers, have led to substantial declines in buy-side spending on sell-side research over the last decade.  According to Integrity Research’s annual research outlook, buy-side spending on sell-side and independent investment research is expected to fall 3.5% to $13.7 billion in 2023. For context, the buy-side dished out more than $17 billion as recently as 2015, representing a CAGR of -2.7%.

In response, banks have significantly reduced their headcount in their equity research departments, while in recent years more mid-sized and regional banks have shut down the function entirely. The inevitable result has been fewer analysts conducting fundamental equity research, while those that remain have tended to focus their efforts on larger companies with bigger Wall Street followings. This means that the underfollowed nature of small- and mid-cap equities has been exacerbated, reducing visibility, frustrating valuations, and ultimately leading to a shareholder base that is unrepresentative of a Company’s long-term opportunity. Today’s risk-off stock market and the scarcity of capital available for emerging growth companies is exacerbating the problem as the banking arm of these sell-side analysts can’t earn.

At Alpha IR, we’re taking proactive steps with our clients to address these challenges in our Wall Street engagement plans.


  1. Undertake A Proactive Buy-Side Targeting & Outreach Plan
  • Getting in front of the right investors is an iterative process that requires a deliberative approach as well as an efficient way to track its progression and course correct as needed. We leverage both top-down and bottom-up analysis to identify institutional investors with a demonstrated proclivity to own equities with similar thematic and idiosyncratic attributes. We overlay these screens with extensive direct experience to build a list of target investors with a high likelihood of conversion. All of the tools we use are available to today’s IROs and it’s critical that smart targeting work is a part of your annual IR planning process.


  1. Set-up Your Own Company-Sponsored Roadshows
  • Roadshows offer an important complement to a conference schedule as they offer more intimate, 1-on-1 conversations with investors and provide greater control over the quality of meetings. Historically a role reserved for covering sell-side analysts, under-covered corporates are being tasked with organizing and hosting their own roadshows. Alpha has evolved over the last few years to use our directory and relationships to help our clients identify the right investors and arrange direct meetings as well. With back-to-the-office programs starting to click, driving your own NDR is becoming possible again for those with limited coverage.


  1. Be Your Own Sell-Side Analyst
  • In addition to driving visibility, sell-side research coverage serves as an important educational tool for the buy-side. With a shrinking universe of sell-side analysts, companies should make sure that their investor materials provide relevant and decision-useful information for investors to easily get up to speed on the story and investment opportunity. This includes taking a more proactive approach to your IR website, creating select IR factsheets, considering XYZ 101 webinars and hosting timely Investor Day events when they make strategic sense, etc. Alpha’s IR Audit process includes a comprehensive review of all IR materials to make sure they are properly structured, decision-useful, and allow investors to self-educate.


As the structural headwinds to the sell-side business model persist, it will be increasingly important for corporations and the IR function to take greater control over functions traditionally reserved for covering analysts. Experienced IROs are learning this the hard way today and at Alpha, we’re helping under-covered companies communicate a more cogent and strategic investor message and better compete for capital in a dynamic market landscape.


According to Integrity Research’s annual research industry outlook, spending by global asset managers on sell-side and independent research is expected to fall 3.5% in 2023 – marking the second consecutive year where investment research spending falls as equity trading volumes decline due to market uncertainty brought on by continued interest rate hikes, bank collapses, weakness in the IPO market, and regulatory changes surrounding research payments.

Integrity 2023 Research Industry Outlook


Buy-side spending on sell-side and independent investment research is expected to fall 3.5% to $13.7 bln in 2022, according to Integrity Research’s annual Investment Research Industry Outlook.  This represents a 19.4% drop in annual research expenditures from the peak spending level of $17 bln seen in 2015.

While spending on sell-side and independent research in Europe is expected to decline as asset managers continue to shrink their research budgets in response to MiFID II, US asset managers will also spend less on research in 2023.  This is due to firms reducing their spending brought on by uncertainty linked to interest rate hikes, bank failures and the likelihood that EU asset managers will struggle to pay for US broker research in the wake of the SEC’s decision to allow their “No Action” relief to lapse after July 3, 2023.

Spending on sell-side research is expected to drop $452 mln or 3.8% in 2023 from $12 bln to $11.53 bln.  The region we expected will record the greatest weakness in 2023 is North America where sell-side research revenue is expected to decline 5.0% as many EU asset managers find they cannot pay for US broker research from their P&Ls due to the SEC’s recent decision to let their No Action relief lapse.  Consequently, they will be forced to discontinue receiving research from many of these US brokers.   Sell-side research spending in Europe is expected to drop by 4.0% as EU asset managers continue to trim their research budgets as it comes from their own pockets.  Spending on sell-side research is expected to slip 1.50% in Asia in 2023.


Buy-side expenditures on independent research is expected to fall 2.2% to $2.15 bln in 2023.  Spending in North America should drop 2.5%, while spending in Europe is expected to fall 2.0% and Asian expenditures should dip 1.0%.  We project that spending on independent fundamental research will slip 3.9%, while spending on independent macroeconomic research will drop 2.9%, and spending on independent quantitative research will slip 2.2% in 2023.  Despite strength in recent years, buy-side spending on primary research – particularly from expert networks – is projected to decline 0.9% in 2023.  Some of this weakness will be driven by concerns about actions taken by the Chinese government against expert networks.  Regardless, the market share for spending on primary research (expert networks, channel check providers, survey vendors, etc.) rose 0.6% to 47.1% in 2023 as asset managers cannot obtain this type of research from their sell-side counterparties.

While the bulk of the $13.68 bln that asset managers spend on investment research is spent to pay for fundamental equity research (a majority of what they pay to the sell-side is for this type of research), institutional investors now spend more on primary research from IRPs ($1.01 bln) than any other type of research they obtain from independent research firms.

The Future for the Research Industry?

While research spending rose modestly in 2020 and 2021, the decline we saw in 2022 and the drop we expect to see in 2023 has prompted some to ask whether we expect continued deterioration in the research industry over the next few years?  The answer is “yes, but”.  We do expect to see asset managers continue to spend less and less for non-differentiated research.  This is particularly the case as many asset managers are now spending their own funds for sell-side and independent research.  In addition, the shift to passive equity management will depress buy-side spending on third-party investment research into the future.

However, we do believe that the market opportunity for innovative research services is actually growing.  We have seen many buy-side firms increase their spending on unique third-party research and data products including expert networks, ESG research, research on under covered companies, AI data driven insights, and research driven by unique alternative datasets.  This has prompted an increasing number of sell-side and independent research firms to build products in these areas.

In addition, we have seen a growing number of research providers and alternative data firms look to expand their businesses by marketing outside the traditional buy-side.  Many macro and policy research firms, expert networks, channel checkers, and alternative data firms have increased their focus on serving corporate customers, PE and VC firms, and even strategy consultants.  In fact, a number of research firms are refusing to serve hedge fund and mutual fund clients due to the competitive nature of these markets and the high cost of serving these demanding clients.

Consequently, we doubt that the investment research industry 5 years from now will look very much like the market we saw 10 – 15 years ago.  Instead, we suspect that firms that innovate their products, expand their client bases, and enhance their expertise are the ones who are likely to win in the marketplace, while research firms that maintain the status quo are likely to continue to lose both customers and revenue.