Underresearched

Equity research has experienced significant downsizing, with the number of analysts at major global banks shrinking by more than a third over the past decade, particularly in Europe and Asia. Pay for analysts has stagnated, and global spending on research has dropped by 50% since 2018, largely due to regulatory changes like MiFID II with the unbundling of research and trading costs. As a result, companies, especially in the small and mid-cap space, are often under-researched, with passive investing exacerbating the issue as buy-side research budgets shrink along with AUM sizes. This dynamic presents both opportunity and threat: it is now possible to discover hidden company gems, but the "price discovery" process in these under-researched stocks becomes more difficult, and their market prices may remain disconnected from their underlying fundamentals for extended periods.