Investment banks are treating their clients more favourably than other companies in equity research coverage, an investigation by The Times has found. The study of the ratings given to listed companies by City brokers provides strong evidence of bias to customers. The findings suggest that reforms introduced by the European Union two years ago to reduce potential conflicts of interest are failing. Of the 16 brokers analysed by The Times, all but one were more likely to favour clients. The analysis ranged from the big Wall Street investment banks, such as JP Morgan, to smaller City firms, such as Numis Corporation (NUM). The analysis found that for Goldman Sachs 47% of its clients were rated a “buy”, compared with 37% of non-clients, and 13% of its clients were rated “sell”, compared with 18% of non-clients. At JP Morgan, 49% of its clients were “buys”, against 42% of non-clients, and 11% of its clients were rated “sell” compared with 17% of non-clients. The analysis of Panmure Gordon found that 93% of its clients were rated “buy” compared with 48% of its non-clients. None of its clients was rated “sell”. Berenberg and Goodbody also did not rate any clients a “sell”.
An American hedge fund that blocked a rescue deal for Interserve, the giant outsourcer, has taken a £17 million short position in Future (FUTR). Coltrane Asset Management is betting that the publisher’s share price is heading for a fall. Its shares have drifted lower since November 27, when a clutch of senior managers sold stock worth £44 million. On the same day the hedge fund, which is based in New York, disclosed that it had taken a sizeable wager against Future. Coltrane has since expanded its short position from 0.67% to 1.2% of the company’s outstanding shares.
