U.K. fund firm Neptune Investment Management has been cultivating links with global academic institutions to supplement its in-house equities research, and its management team thinks other firms should do the same.
The advice comes just a few weeks after the introduction of new rules under the Markets in Financial Services Directive II in January. The rules, which require that fund firms separate out fees paid for research from trading costs, have prompted European fund managers to prepare to cut research they buy from banks, according to a CFA Institute survey from November.
James Dowey, Neptune’s chief investment officer, explained that the firm’s academic links predate the changes resulting from MiFID II, and are key to building credible investment cases in areas where brokers offer little depth.
“There tends to be a bit of antagonism between academia and the financial industry, a mutual snobbery,” Dowey told Institutional Investor. “But there is a lot of good research in the academic community.”
Some sell-side institutions have recently reduced Russia coverage, for example. “You had brokers pulling out after the Crimea/Ukraine conflict, which lowered the breadth of research,” he explained. “The macro work done across emerging markets is not as good on the sell-side as it is in developed markets.”
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Neptune also sponsors of many of the sporting clubs at the University of Oxford, including cricket, cross country, rugby, tennis, and water polo, among others. Every member of Neptune’s investment team has a degree from either Oxford or Cambridge universities.
“We are quite well plugged into where we came from,” chief executive Robin Geffen said. “Using that wider network for reference and having real respect for top quality academic research is quite unusual in our business.”
In March, members of the company’s investment team will be heading to the U.S. to meet with academic contacts at Harvard University. The trip, according to Dowey, is the direct result of being a part of the academic community at Oxford.
Neptune Investment Management managed £3.6 billion ($5 billion) of assets at the end of 2017, according to a spokeswoman for the business.