Seed Alpha Introduces New Technology to Revolutionize Equity Research

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Seed Alpha addresses the access, payment and regulatory issues surrounding the way institutional investment research is used and paid for

investment research audit regulations

Seed Alpha Launches Worldwide

Seed Alpha enables us to effortlessly manage the vast amounts of research we consume, while providing an audit trail for customers and regulators.

London \ Seed Alpha, a new technology that changes the way institutional investment research is managed and delivered, was launched today in Hong Kong. With early adopters such as Ballingal Investment Advisors, it solves the issues that both buy side and researchers face as regulators around the world look to change the way equity research is paid for.

The cloud-based platform provides a central location for buy-side firms to manage their research, while delivering content to them from research providers in a format similar to popular online music platforms. It provides a completely transparent audit trail showing who is using the research and what was paid for it. For researchers, it offers instant access to a universe of potential consumers who otherwise would have been time consuming and costly to reach.

“We, along with the rest of the industry, have been looking for ways to manage the research bill that allows us to demonstrate best practice to our clients,” said Andrew Ballingal, founder and CEO of Ballingal Investment Advisors. “Seed Alpha gives us the ability to effortlessly manage the vast amounts of research we consume, while providing an audit trail for customers and regulators. We’ve seen increasing demand from our investors to know exactly what their money is paying for in terms of research and commissions, and this is a great way to easily demonstrate that what we’re paying is adding value and alpha to their portfolios and investment process.”

Seed Alpha solves the problems that have plagued the research industry since it began. Much equity research is provided for free in return for dealing commissions, but estimates indicate that as little as 10 percent is actually read . When research is paid for, it’s funded from assets under management, not fees, yet there is no audit trail to prove to end-investors or regulators that the research being paid for is actually providing alpha-generating ideas.

Now, with the practice of using dealing commissions to pay for research in flux in Europe, no matter the final settlement of these issues under MiFID II, the one certainty is that there will be a dramatic shift the way research is consumed, priced and valued right across the globe.

“These changes cannot be underestimated – they will have repercussions across all regions,” said Seed Alpha co-founder Edward Stockreisser. “Most asset managers are not set up to meet these proposed changes, and this is where Seed Alpha can help. It’s about improved transparency, accountability and efficiency.”

"Additionally, the technology solves the challenges the buy side face in sourcing ‘best research.’ It’s always been hard for managers to cut through the noise to find research that really generates alpha,” said Stockreisser. “Seed Alpha is as easy to use as an app. It answers the access, payment and regulatory issues for the buy side and provides an extremely powerful sales and customer relationship management tool for the research providers.”

Investor Andrew Ballingal, a shareholder in Jade Technologies, the company that developed Seed Alpha, said he was convinced of the potential of the technology.

“As an investor, what you look for is a simple solution to a problem. If you’re asking ‘Why has nobody done this before?’ then you know you’re onto something interesting. That’s the case with Seed Alpha, and I'm really excited to see it develop from here.”

Co-founder Shan Han said he fully expects Seed Alpha to create waves within the industry. “Bringing sudden and full transparency to a previously opaque industry is going to be uncomfortable for some, no question about that,” he said. “But, what you’ll see as this kind of technology gains traction is a genuine change that favors quality providers. If their research is good, the buy side will demand it. We want everyone to be talking about ‘best research’ and finding it through Seed Alpha.”

How It Works
Seed Alpha is underpinned by proprietary algorithms that learn how each user interacts with research, and make suggestions about other research pieces and providers that may be relevant. It also provides a ‘warehouse’ for research, unclogging buy-side inboxes and transparently managing the consumption of research, enabling managers to prove to auditors and regulators that the research they’re paying for really is adding value.

Buy-side users can buy research on a case-by-case basis, removing the need for expensive and complex subscription arrangements and ensuring managers are only paying for what they actually use. Research reports can be annotated within the system and shared with other users within the firm, increasing the value of the research to the team. Users can communicate directly with specific researchers to ask questions about reports, commission bespoke reports or to request trials from new providers, reducing the time spent in pitch meetings. Users also can run Seed Alpha alongside a news feed to determine which providers have responded first to market-moving news, and see which has the most time-sensitive research.

Seed Alpha Chairman Peter Allen said, that for Research Providers (RPs), Seed Alpha solves the problems of access to the fund management community. “Right now it’s very hit-and-miss as to who RPs reach out to in the fund management universe to promote their offerings. It’s equally difficult for fund managers to find ‘best research.’ Seed Alpha matches Portfolio Managers’ (PMs) interests to research expertise. For RPs, it’s a marketing/sales and CRM platform, while for PMs it’s a fabulous discovery engine. This will be an incredibly valuable feature in the future, as the amount of research available from investment banks falls.”

Researchers can use Seed Alpha to highlight specific reports to fund managers who may not be aware of them. It allows providers to benchmark their research against the competition, a previously impossible task. It also helps manage intellectual property preservation with sharing restrictions and watermarking.

Seed Alpha does not charge commissions on research sales or consumption, instead charging a flat annual fee for all users.

According to Stockreisser, this as a key reason the company can focus on developing a holistic solution for actual buy-side and research provider needs, rather than shoving the wrong content in front of people for the commission.

Seed Alpha aims to feature 2,000 research providers by the second quarter of 2016.

“There’s no barrier to entry for the providers – they just need to sign up,” Stockreisser said.

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Rebecca Scanlan
Continuum Partners
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