Wall Street research has never been worse: Brown

By Svea Herbst-Bayliss

NEW YORK (Reuters) - Wall Street may pride itself on being the world's best financial center but the research that analysts at investment banks are delivering is not the best, a prominent hedge fund manager said on Wednesday.

"It has never been worse. And I don't see how that is going to change," Tom Brown, who runs $550 million Second Curve Capital, said at the Reuters Investment Summit in New York.

A few years ago regulators had charged banks with issuing favorable research about lackluster companies in order to try and win investment banking business for their firms. Citigroup and other Wall Street banks paid a total $1.4 billion to settle the charges.

But Brown said that since then investment banks have failed to retain the top talent needed that drives high-quality research.

"Wall Street firms can't pay enough compared to hedge funds and money managers, and anyone who is good will be taken away by them," Brown said.

Brown, who concentrates on financial stocks, is an example of the trend he describes.

He was once a top-ranked banking analyst for firms like Smith Barney and Paine Webber before being wooed away by hedge fund industry icon Julian Robertson's Tiger Management.

The trend of analysts migrating away from Wall Street has long been noticeable, but it may now accelerate because even asset managers, once considered a dull alternative, present appealing opportunities.  Continued...