HONG KONG • Societe Generale will use Singapore-based fintech company Smartkarma to provide third-party Asian equity research to its institutional clients, in a deal that reflects major changes in the global investment research landscape.
The French bank, which does not currently provide equity research in Asia, will give its institutional clients access to a pool of independent research aggregated and curated by Smartkarma instead of offering content itself, said Mr Stephane Loiseau, the bank's head of cash equities and global execution services for the Asia-Pacific.
The agreement, the first of its kind in Asia where a bank has effectively outsourced equity research provision to independent third parties, signals that investment banks are beginning to radically rethink their research franchises amid new rules that some analysts say could result in a 30 per cent decline in global research spending.
"The landscape for investment insight is changing. The situation is especially challenging in Asia, which is a fragmented region with a vast scope of stocks and, in some markets, new regulation is making the picture even more complex," said Mr Loiseau.
Smartkarma is an online financial technology, or "fintech", company that offers investors research pooled from more than a hundred independent analysts.
Similar to popular film-streaming website Netflix, Smartkarma allows users to search for specific content and consume it on-demand. The model allows investors greater control over the research production process, said Mr Jon Foster, Smartkarma's co-founder.
Independent research is gaining popularity amid a regulatory-driven shake-up in traditional investment bank research models.
New rules mean banks will in future be prohibited from giving away research free to clients in return for trading commissions, and investors will have to vet the quality of research and pay for it separately.
This spells trouble for investment banks because investors are unlikely to pay for much of the research currently produced, according to an August report by Hong Kong consultancy Quinlan & Associates, which estimates that global investment research spending could fall by as much as 30 per cent by 2020.
Several banks, including Goldman Sachs and Nomura, have cut Asia equity research roles this year in order to trim costs.
SocGen will offer clients access to Smartkarma content and charge them independently of trading services. Societe Generale and Smartkarma did not disclose the financial terms of their arrangement.