Conference Magazine - GoingPublic.de - Deutsches Eigenkapitalforum

Capital Markets
Research under fire
The value of equity research for the
German small- & mid-cap sector
The financial crisis is leaving behind ever more significant
marks on the field of equity research. Many banks have
closed their research departments completely or have
entered into partnership arrangements. The research headcount
has been reduced in most banks. This means that
coverage – especially of small to mid-sized companies –
has been decreasing.
Berenberg is profiting from this trend. It has steadily built up
its Equity Research department over the last few years and
currently employs 70 analysts in London, mainly covering
European shares. Split into 22 sectors, the focus is very
much on mid-cap companies, especially those based in
Germany.
More than 90% of the companies listed in the MDAX and
TecDAX indices are covered, as are the larger SDAX
companies. Investment in mid-cap companies often has a
decisive impact on the outperformance of an investment
fund – for example, the MDAX has continuously outperformed
the DAX in recent years.
Fund managers, however, have more difficulty in selecting
companies, as fewer research reports are available and the
Investor Relations and Communications departments are
typically smaller and incapable of competing with the infrastructure
of a blue chip company. This is where Berenberg
steps in, publishing comprehensive research, organising
Figure 1: Performance, DAX vs. MDAX since 2002
260%
240%
220%
200%
180%
160%
140%
120%
100%
80%
60%
Page 22 Deutsches Eigenkapitalforum 2012
July 2008 – today: Head of Equity Research,
June 2005 – June 2008:
Head of German Equity Research,
December/1996 – May/2005: Analyst
for German Small- and Mid-Caps,
Berenberg Bank
40%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Bloomberg, Berenberg Bank
DAX MDAX
Gunnar Cohrs, Head of Equity
Research, Berenberg Bank
roadshows and hosting conferences, our recent
conference in Munich during Oktoberfest being one example.
In this way, companies can raise their profile.
Banks often claim that there is less to be gained from covering
mid-cap companies, as their market cap is smaller and
the potential commissions are lower, but they tend to overlook
the fact that the mid-cap space, in addition to classic
share trading, offers a range of interesting business opportunities,
such as block trading or placing shares of established
shareholders.
Is research a cost or profit centre?
In a market that is over-broked and
structurally shrinking, it is important to
pursue a clear business strategy. For
almost 20 years, Berenberg has
focused on producing high-quality
research and providing a first-class
service for its institutional clients.
Berenberg also benefits from its ownership
and management structure.
Being owner-run, the entrepreneurial
spirit is encouraged and embodied
across the board. Due to the bank’s