Episode 60 · 2021-01-27 · 29:52 · Original in Finnish
Democratising Equity Research | Sauli Vilén | Negotiator 60
Originally published as “Osakeanalyysin demokratisointi | Sauli Vilén | Neuvottelija 60”
Inderes chief analyst Sauli Vilén explains why traditional equity research has withered in Finland and how Inderes built a model in its place, in which the listed companies under coverage pay for the research and investors get it free. At the heart of the discussion is the question of independence: in the old model research was tied to trading commissions and to an investment bank's transaction revenue, while in the new model the incentive risk comes from the paying companies. Vilén concedes outright that no perfect model exists, and explains why a community of almost 80,000 investors and an open model portfolio hold the analysts accountable every day. Sami Miettinen measures the views against his own background in London investment banking, where brokerage commissions and the objectivity of reports were of an entirely different order. Vilén closes with the Sampo case as an example of how capital allocation decides an investment case, and reminds listeners never to rely on a single source.
Watch and listen
Key moments
- 00:00 — The goal is to democratise equity research for everyone
- 00:54 — Introducing Inderes chief analyst Sauli Vilén
- 01:23 — What exactly is Inderes independent of
- 01:54 — Traditional research was built on trading
- 03:30 — The companies under coverage pay for Inderes research
- 04:00 — It started as startup tinkering, subcontracting for Nordnet
- 04:51 — In 2007 Finland had 150 equity analysts
- 05:26 — The number of analysts halved
- 05:47 — Commissions and trading volumes came down
- 06:16 — Small caps were the first cut from coverage
- 06:43 — MiFID II separated research from brokerage
- 08:36 — In IPOs the need for trustworthy information is large
- 09:17 — Inderes selects its IPO mandates carefully
- 10:11 — The investment-banking link is a worse risk than trading
- 12:41 — Somebody always ends up paying for the research
- 13:42 — Independence is proven by doing the work every day
- 14:17 — The model portfolio as evidence that the research works
- 14:48 — In equity research the results are easy to measure
- 16:37 — Institutions get the same access as private investors
- 18:40 — Research in plain language instead of code
- 19:54 — Broad reports in the groundwork for M&A
- 20:06 — The quality of debate on the investor forum is surprising
- 21:41 — Pseudonyms and the experts behind them
- 23:02 — The analyst assembles a jigsaw with incomplete information
- 23:57 — Is Sampo worth buying right now
- 24:53 — Allocating the capital freed up from Nordea is decisive
- 26:54 — Insurance became an exceptionally attractive business
- 27:57 — The conglomerate discount disappears with the Nordea sale
- 28:32 — How an index investor buys an individual share
- 29:10 — Never listen to only one source
Summary
Inderes chief analyst Sauli Vilén explains why traditional equity research has withered in Finland and how Inderes built a model in its place, in which the listed companies under coverage pay for the research and investors get it free. At the heart of the discussion is the question of independence: in the old model research was tied to trading commissions and to an investment bank’s transaction revenue, while in the new model the incentive risk comes from the paying companies. Vilén concedes outright that no perfect model exists, and explains why a community of almost 80,000 investors and an open model portfolio hold the analysts accountable every day. Sami Miettinen measures the views against his own background in London investment banking, where brokerage commissions and the objectivity of reports were of an entirely different order. Vilén closes with the Sampo case as an example of how capital allocation decides an investment case, and reminds listeners never to rely on a single source.
Chapters
- 00:00 — The goal is to democratise equity research for everyone
- 00:54 — Introducing Inderes chief analyst Sauli Vilén
- 01:23 — What exactly is Inderes independent of
- 01:54 — Traditional research was built on trading
- 03:30 — The companies under coverage pay for Inderes research
- 04:00 — It started as startup tinkering, subcontracting for Nordnet
- 04:51 — In 2007 Finland had 150 equity analysts
- 05:26 — The number of analysts halved
- 05:47 — Commissions and trading volumes came down
- 06:16 — Small caps were the first cut from coverage
- 06:43 — MiFID II separated research from brokerage
- 08:36 — In IPOs the need for trustworthy information is large
- 09:17 — Inderes selects its IPO mandates carefully
- 10:11 — The investment-banking link is a worse risk than trading
- 12:41 — Somebody always ends up paying for the research
- 13:42 — Independence is proven by doing the work every day
- 14:17 — The model portfolio as evidence that the research works
- 14:48 — In equity research the results are easy to measure
- 16:37 — Institutions get the same access as private investors
- 18:40 — Research in plain language instead of code
- 19:54 — Broad reports in the groundwork for M&A
- 20:06 — The quality of debate on the investor forum is surprising
- 21:41 — Pseudonyms and the experts behind them
- 23:02 — The analyst assembles a jigsaw with incomplete information
- 23:57 — Is Sampo worth buying right now
- 24:53 — Allocating the capital freed up from Nordea is decisive
- 26:54 — Insurance became an exceptionally attractive business
- 27:57 — The conglomerate discount disappears with the Nordea sale
- 28:32 — How an index investor buys an individual share
- 29:10 — Never listen to only one source
Watch
The recording lives on the Neuvottelija channel: Osakeanalyysin demokratisointi | Sauli Vilén | Neuvottelija 60. A Finnish edition of this episode is published at www.neuvottelija.fi.
People and topics
Guests: Sauli Vilén
Topics: Investing & Markets