Spending on Expert Networks Declines

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Overall spending declines while usage increases reflecting price wars as smaller firms seek to expand market share. The broader outlook is positive as user base expands outside the U.S. and beyond hedge funds to corporate and private equity markets.

Spending on expert networks, which connect investors and other researchers with industry experts, is projected to decline 16% in 2009, according to a study released by Integrity Research, a specialist research firm covering the investment research industry.

In the latest edition of Integrity ResearchFocus® reports which review key segments of the investment research industry, Integrity estimates that overall spending on expert networks will decline to $364 million in 2009 from $433 million in 2008. "This decline is not the result of reduced usage, but price competition as some expert networks have tried to increase market share," said Michael Mayhew, Integrity’s chairman and co-author of the study.

Nevertheless, expert networks continue to proliferate. Integrity's latest report covers 37 expert networks, up from 25 firms covered in its previous report on expert networks in February 2008. Over the last 12 months, 6 new expert networks launched. "We are starting to see some consolidation with acquisitions of Vista Research by Guidepoint Global and TGR Research by Gerson Lehrman Group," said Ronit Bhattacharyya, research analyst and co-author, "but new entrants still outnumber the exits."

For the report, Integrity surveyed 301 hedge fund and long only investors, including 120 users of expert network systems in Europe and North America. The results show that expert networks are well-entrenched with professional investors. Over 40% of expert network users rated expert networks either 'extremely' or 'very' important to their investment process.

The Pequot and Galleon insider trading scandals appear to have left expert networks unscathed, so far. The scandals underline the importance of expert networks' investments in compliance policies and procedures, and represent an opportunity for those with robust compliance systems. However, not all expert networks have made commitments to upgrading their compliance capabilities, as highlighted in Integrity's review.

Based on user feedback, Integrity also selected its 2009 Top Picks for Expert Networks in four categories of expert networks: Global Generalists, Technology Specialists, Healthcare Specialists, and European Specialists.

The outlook for expert networks continues to be positive, as usage is expanding globally, and into new markets such as corporate users and private equity.

The 138-page Integrity ResearchFocus® report includes with an overview of the expert network segment, a review of expert networks' compliance programs, comparative analysis of the different expert networks, the 2009 Top Picks for Expert Networks, and an analysis of the future of the expert network industry. Profiles of each of the 37 expert networks identified in the review are included in the final section. The report is used as a “buyers guide” for users of expert networks. For additional information go to http://www.integrity-research.com/expertnetworks/ or contact Matthew Bannister at 646.786.6851.

About Integrity Research
Integrity Research Associates, LLC is an information and solutions provider specializing in the investment research industry. Its institutional investor clients use Integrity’s services to find new research providers and monitor existing ones. Integrity ResearchSelect® provides confidential, customized searches tailored to investors’ requirements. Integrity covers over 3,000 research firms in the U.S., Europe and Asia. Additional information about Integrity can be found at http://www.integrity-research.com.


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