Navigating the AI frontier in investment research
As artificial intelligence reshapes the financial services landscape, research providers face a dual challenge: maximizing the efficiency of new tech while fiercely protecting their intellectual property.
At the recent Substantive Research Unbundling Uncovered conference in New York, these high-stakes questions took center stage. Mike Grubert, Head of Public Equities and Credit at Third Bridge, spoke to the Substantive team right after he stepped off his panel, "The View from the Sell Side"—moderated by Substantive Research CEO Mike Carrodus, and featuring research leaders from Jefferies, Evercore ISI, Citi, Bernstein, and RBC Capital Markets.
Mike shared his takeaways on how the buy-side and sell-side must collaborate to safeguard IP, restructure pricing for LLM ingestion, and continue delivering true alpha.
Q: Can you start by telling us a little bit about yourself and Third Bridge?
Mike Grubert: I am the Head of Public Equities and Credit at expert network Third Bridge. Third Bridge is widely recognized as the leading global provider of expert insights, serving the investment community with proprietary research.
Q: There are concerns that rapid technology evolution is eroding control over a provider's intellectual property. In your opinion, is the solution tech-driven, or is it about the commercial framework between consumers and providers?
Mike Grubert: It's a very good question. This isn't the first disruption or opportunity that investment banks or sell-side research providers have faced. While things are moving incredibly fast, we can absolutely craft solutions that protect our IP, and our clients' IP, while still driving a significant return on equity (ROE) for everyone involved.
"There is simply more at stake from an IP perspective when you are feeding proprietary content or research into a Large Language Model (LLM)."
Because of this, commercial conversations have become much more granular and rigorous, which makes total sense. But while you can get comfortable with a commercial arrangement on paper, you ultimately need those technical checks and balances in place so both sides feel secure about the long-term arrangement and ensure the appropriate protections are really there.
Q: In a time of such rapid change, what is the single "North Star" strategy or metric that research professionals should focus on?
Mike Grubert: Remember that AI is not a substitute for human investor judgment, experience, or discretion. It is, however, an unprecedented productivity tool, the likes of which we’ve never seen.
The market is shifting. Rote information is more readily available than ever, often sitting right outside the paywall in easily digestible forms. If you want to succeed, your North Star must be: What unique insights and differentiated views are you providing to your client base? If you stay laser-focused on how you are delivering actual alpha to your clients, you will always find your way.
Q: What is the most important takeaway from today's "View from the Sell Side" panel?
Mike Grubert: My main takeaway is that AI presents challenges, but it also opens up historic opportunities in the research and investment content space.
In the past, market participants, and sometimes even providers and clients, operated in silos. Moving forward, it is absolutely vital for key partners across both the sell-side and the buy-side to maintain an active, open dialogue.
We need to co-create structures and pricing models regarding how research is ingested into internal buy-side LLMs. It must be structured in a way where there are appropriate protections for both sides, without losing sight of the massive returns and opportunities this technology can yield.
