Singapore Fintech Firm Expands Equity Research, Helped by MiFID

(Bloomberg) -- A Singapore-based fintech firm wants to capitalize on new European rules requiring banks to charge for research by expanding beyond Asia to offer analysis on U.S. and European financial markets.

Smartkarma, which distributes research from about 400 analysts over an online platform, has been encouraged by the positive response to its Asian product since the company started three years ago, the firm’s Chief Executive Officer Raghav Kapoor said.

“Our client base is growing rapidly, and includes all professional investors with interest in Asia or Asia-driven themes," said Kapoor, in an emailed response to questions. “Many of these are based in the U.K./Europe and the U.S. A natural growth path for Smartkarma is to move closer to these domiciles.”

Smartkarma hopes that the European Union’s new Markets in Financial Instruments Directive, which will require money managers to pay for research separately from broking services from January, will make it easier to attract analysts to offer research over its platform. The so-called MiFID II rules are expected to curb profit margins at asset managers, who will have to budget for research for the first time, as well as force sell-side firms to justify the cost of their teams of analysts.

Varied Pricing

JPMorgan Chase & Co. plans to charge $10,000 a year for read-only access to research on stocks, while Barclays Plc has proposed a similar package for 30,000 pounds ($39,000). Other firms plan to distribute some of their research for free.

“The whole problem right now is that every bank is coming up with crazy pricing, all sorts of various things, which doesn’t make the life of fund managers easy,” said Kapoor, who used to work for Religare Capital Markets and Citigroup Inc. He said Smartkarma offers a simple pricing solution for its customers, and an attractive way for its analysts to distribute their work.

Smartkarma charges an annual flat fee of $7,500 per user to the “several hundreds” of asset-management firms which currently buy its service, Kapoor said. It pays its analysts freelance fees based on the popularity of their research among users, he added. The most popular analysts can earn more than $10,000 per month, he said.

Last year, Paris-based Societe Generale SA signed up Smartkarma to provide Asian equity research to its clients.

Among the research reports currently displayed on the Smarkarma site are analyses on the impact of China’s antitrust review for Toshiba Corp., on the recent conviction of Samsung heir Jay Y. Lee for bribery, and on the Reserve Bank of India’s annual report.

Kapoor declined to provide details of the new European and U.S. service, beyond saying it will be based on the firm’s existing technology.

Smarkarma has 30 full-time employees and has so far raised $7.5 million from investors including Wavemaker Partners LLC and Jungle Ventures. Kapoor said the "market conditions are right" for another round of fund raising, but declined to elaborate.