The Investment Research Partnership

Consultancy Case Study 4

New Market development for major mutual fund data provider.

Citation Summary

A global data, ratings and analysis company, via their UK subsidiary, required a market analysis of the Scandinavian region to establish market size, market potential, review existing data providers and sources.

Client's Business

This UK company had recently been bought by a global US based data company and was looking to strengthen their position in the field of investment analysis in regard to mutual funds. This global data company was already regarded as market leader in Bond market ratings and having bought this UK mutual data company, now wanted to become market leaders in the Mutual fund analysis arena and develop enhanced services for this market.

Critical Client Issues

The UK subsidiary was well established in most mainland European counties (in many cases the market leader) with both local data content and clients. The aim was to repeat this model in Scandinavia.

The Scandinavian market consisted of Sweden, Finland, Norway and Denmark. The US parent company had a presence in Sweden and from here serviced other Scandinavian clients. The UK subsidiary had no presence, few clients but did have connections through Scandinavian mutual companies providing services in other countries.

The concern was the amount of future revenue that could be produced from this small market place. A key driver in the UK subsidiary model was not only the revenue that could be produced within the domestic market place of the mutual funds but also the resell value to other jurisdictions. With Mutual funds being a global market (certainly within Europe there was well established and growing cross border level of fund sales) the potential for sales of the databases to other clients in other countries could be responsible for 40% to 50% of database revenue.

This review also had to establish what local provider services were available, the level of sophistication in the market place, growth potential (domestic and international) and long term cross selling opportunities (i.e. the potential to sell to Scandinavian countries the other databases and service provided by the UK subsidiary.

The research and analysis carried by Grahame Goodyer

Initial research centred on the existing market size. All four countries were reviewed. The market size and dominance of each was considered and Sweden was chosen as the test country to carry out an initial local review.

Sweden was the most developed in terms of size of the market, market accessibility to buy from non domestic funds and in the use of technology to research and buy funds. There was also a major changes in the pensions market which would remove the control of pension funds from Government dictate to open market philosophy.

Finland was in a similar position but smaller in size. Norway was in the process of changing legislation to open up the domestic market to international product. Denmark was small and domestic only but had started reviews to develop new opportunities but had yet to make the statutory changes required.

The local research and review included meetings with the local governing authorities, domestic and international fund companies, IFAs, local data providers and domestic financial press.

Similar reviews were then carried out in Finland, Norway and Denmark.

Client Results/Benefits

For UK subsidiary to establish a presence in each country was found not to be cost effective. We proposed that the region should be managed in terms of data management and sales of product and services through one of the existing data centers already established. The US parent company already had an established based in Sweden and it was proposed that this be used a local base when required.

Two database centres were proposed, London and Paris. Both had good communications by air to all four countries. Paris was chosen as London was already over stretched with existing development work.

Research had found that there were a number of existing domestic data suppliers. The problem was getting access to reliable historic pricing. It was decided that from a range of companies one was chosen which had a well developed database and infrastructure to supply, develop and maintain a database from which the UK subsidiary could then utilise and resell. Again Sweden was the first country to be developed followed by Finland and Norway.

It was proposed that each country provide a local data source but over time there was consolidation in the Scandinavian database market and cross border mergers took place which the UK company was able to benefit from. This meant that instead of 4 providers only 2 were required.

Subsequent to the research being completed in October 2000, the first of the databases were available to the marketplace in July 2001.

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