the “buy side” analysts: the new decision makers?

This week end, I found a really interesting article in the “Money & Investing part of the Wall Street Journal; “Fund analysts steering the ship” where the journalist explains that numerous investment management companies have changed their processes by giving more responsibilities to the analysts.

He explains in his article that, according to their deeper knowledge of the companies they follow (they usually track stocks in one particular industry when portfolio managers watch hundreds of companies), the analysts are less likely to take big risk on the market, hence, more likely to produce superior returns.

What do you think about that? Do you think it is the end of the “stars” portfolio managers?

Here is a sample of this article:

“BOSTON — The reputations of Wall Street securities analysts have taken some lumps in recent years, after disclosures that some were recommending stocks they didn’t really like to help their firms keep corporate clients happy. But the stature of mutual-fund analysts on the “buy side” of the business seems to be only rising. Fund analysts typically have scrutinized corporate data, visited far-flung factories and grilled executives to generate insights that more-powerful portfolio managers could accept or reject. But at some fund operators, including Fidelity Investments, Putnam Investments and Sun Life Financial Inc.’s MFS Investment Management, analysts are doing more, picking stocks themselfs or wielding power to steer managers from certain investments. (…)”