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First Principles

Redburn was launched in 2003. It was founded on a passionate belief in the importance of in-depth, uncompromised, fundamental research, and serving clients, particularly when augmented by high quality agency execution.

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In the wake of the Myners Report and Eliot Spitzer’s interventions on Wall Street, the status of the equity analyst had fallen dramatically. Unable to maintain one foot in corporate finance, and so shorn of part of their value to investment banks, many had joined hedge funds or left the industry. Counter-consensually, the founders of Redburn believed there was still a vital role for excellent research working within an agency-only execution model. They were convinced that equity analysts, liberated from the industrial processes of the bulge bracket and allowed time and space to ‘do the work’, could add value to active managers who in turn would be prepared to pay for it. In short, Redburn was conceived in the belief there was a different way, a better way.

We were a small, entrepreneurial gang of outsiders who coalesced around that simple idea. Fifteen years later, we are larger, more complex and more professional. But at heart we remain non-conformists, retaining the attitude and purpose that invigorated us then.

We still believe in the power of difference to make a difference to our clients’ business. In Research, we endeavour to hire the most able analysts (though we know we have no monopoly) and find raw talent with the greatest potential. Our distinct model affords them the scope to develop genuine industrial authority, to be creative, to be relevant, and to find the most potent and remunerative ideas and themes.

Creativity and authority require a careful balance between the rigours of order and fertility of chaos. We provide levels of quality assurance – for argumentation, for numbers, for prose – disproportionate to the scale of our business. We aim to publish our ideas in appropriate and innovative formats, such as the Redburn Review, The Soapbox and Thinking Allowed. We hope to lead the debate.

In Execution, innovation, technology and above all being client-centered are our watchwords: we understand the critical importance and power of liquidity sourcing, through a combination of high-touch trading and innovative aggregation technologies, supported by experienced traders and sales traders, execution analytics, operations.

The past fifteen years have not been an easy ride. There have been some extremely challenging phases in the industry – the credit crunch, the Euro crisis, Brexit and, of course, MiFID II. Powerful deflationary pressures have led to a collapse in our addressable market. Yet not only have we grown consistently throughout the past decade, we have built and retained leading market shares with some of the largest institutional investors globally, in both research and execution.

We have never doubted it is through undertaking the ‘hard yards’ of research and providing consistent, verifiably market-leading execution that we must build our brand.

The advertising guru John Hegarty once observed: “Information goes in through the heart.” This is true whether the consumer is a professional or not. Redburn understands it is not simply that the content of our work must be premium, that is axiomatic, but there must also be an emotional connection – a covenant – with our clients. In the hurly-burly of markets, we should be, and are, when most successful, interdependent and reliant on each other. There is a client who admits to stacking all the back copies of the Redburn Review by his bed. I can think of no greater emotional connection between a research provider and its customer (though whether his other half agrees is moot).

The question is whether, post MiFID II, this model, this brand, these terms of trade, can continue to deliver the growth and self-respect that was the genesis of Redburn. There has been much brow-beating from others on the sell-side about the iniquities of MiFID II. We hear assertions from subsidised competition that the only sensible post-MiFID II model is one that is, well, subsidised.

However, blaming inadequate pricing power on external factors or justifying comparative advantage on the basis of subvention, rather than client service or product, does neither the sell-side nor its clients any favours. To prosper, the sell-side must focus on growing the power of its offer. It must deliver content and a service that commands genuine standalone pricing power regardless of the regulatory or competitive backdrop.

It was the Duke of Wellington who said: ‘‘All the business of war, and indeed all the business of life, is to endeavour to find out what you don’t know by what you do.” What Redburn ‘knows’ is the power of the outsider in delivering the research and execution that clients require. It is on this building block that we shall be upping our game, consistent with the belief that informed us fifteen years ago, that there is always a different way, a better way.