Musical chairs is a tradition in this industry but it picks up pace in bad times as firms struggle to hang on to their star performers. The loss of a number of top analysts can easily upset a firm's research performance and its standing among fund managers it relies on almost solely for business.
Yet one firm - Deutsche Bank Securities - has consistently remained at the top of the research rankings in the FM's ratings of brokers and analysts.
Deutsche's success in good times and bad has much to do with its strong culture and the intensely competitive style of its head of equities - and de facto chief honcho - Murray Winckler.
But underlying the more recent success is a long tradition of quality research through teamwork.
For many years, Deutsche was a steady number two, behind the then Martin & Co, now called JP Morgan. That changed six years ago, in the 1997 survey, when Deutsche Morgan Grenfell - the then investment banking arm of German giant Deutsche Bank - took over as the research leader.
This year, its leadership in the survey's key rankings is comprehensive. It is first in the firms' equities research ranking and in the overall research ranking. Of the 41 research sectors covered, its analysts are ranked in the top six in 32, one more than last year. In these sectors it captured six first places, nine seconds and six thirds.
It also leads the rankings for sales teams, equities dealing (where it is up from second last year) and fixed-interest dealing. It is fourth for administration, a measure of the efficiency of the firms' back-office functions.
What lies behind Deutsche's consistency? One reason is that the firm was unusually successful at managing the generational changeover when its founder, Ivor Jones, began withdrawing from the business in the mid-1990s and others of his generation retired.
In this regard, it contrasts notably with Martin & Co, its long-time arch-rival in the investment research stakes.
Like others, Martin struck a deal with an international player. Eventually taken over by US group Chase/JP Morgan, the firm did not have the same success in building a new generation of strong analysts - though it does have its top analysts, such as this year's gold mining leader, James Wellsted.
At Deutsche the transition was relatively smooth. But it has benefited from three powerful and distinctive leaders . Over more than three decades, it has maintained an intense corporate culture. In more recent years, it has placed still greater emphasis on its research operation, despite its high cost.
In the 1970s, Jones, a chartered accountant, was an early convert to the importance of investment research. This helped set the ethos of the firm for many years. He hand picked his analysts and demanded high standards. The firm invested heavily in a research database, which became one of its most valuable assets.
When Jones withdrew, he handed over management control to Ted Woods, a CA and MBA, and a former top-ranked industrial analyst. Woods took over in an industry facing dramatic change after deregulation and the entry of global investment banks to the SA market.
His management style was less hard-edged than his predecessor's. But there was no easing in the competitive culture. He also proved adept at picking and developing key people.
Crucial among these was Winckler, who became head of research. Winckler joined the firm about 14 years ago when he was in his 20s, and is himself a product of the firm's selection process.
Even before his recruitment, he had demonstrated his competitive nature. After matriculating at Pretoria Boys' High, he studied accountancy. While taking his CA, he played squash as a seeded Springbok.
He became a rated analyst in key sectors such as beverages and luxury goods. When he became the firm's investment strategist, he was ranked top in that sector. As head of research, and more recently as head of equities, he has taken an uncompromising stance that the firm should be number one in research.
Demanding leadership has been part of this. As a senior colleague put it: "He supports his people and worries about them. At the same time he will kick their butts until their noses bleed."
Strong academic credentials are important. Most of the firm's industrial analysts are accountants; several of the team are chartered financial analysts.
Winckler says new recruits are selected carefully . "It is important that they will fit into the team ," he says.
Naturally, competitive remuneration packages and incentives are important. Deutsche has a reputation for paying well for delivery. And whopping packages have been paid in this industry, even though it's in a bear market (see page 22).
Winckler says two or three years ago, surveys showed top-rated analysts in a few large market-cap sectors could have commanded total packages of about R5m. Now, he says, this has shrunk to about R2m-R3m. In smaller sectors, he says, industry packages for top-three ranked analysts would now be about R1m, down from R1,7m-R2m.
Money is only one aspect. Deutsche has been successful at keeping its team intact . "There have been a lot of pressures on us to cut back ," he adds. "One has to resist that. We have reduced over the past two years , but carefully so."
The team effect and competitive atmosphere have been evident in various ways. A few years ago, the firm seemed to be behind in the resources sectors. This year, it has second places in gold and platinum (Brenton Saunders) and a joint second (Andrew Jackson) in other mineral extractors & mining finance.
It also lagged behind for a while in economics but now has Chantal Valentine first in domestic economics and Gordon Smith second in international markets. Gavin Vorwerg, the lead industrial analyst, held his first in beverages. Research head Dave Murray had to pick up where Winckler left off a few years ago. This year, Murray is second in investment strategy and first in corporate governance research.
In part, success reinforces success in this market. Local institutional investors are tending to use fewer brokers, and Winckler notes there is a shift towards the top three, Merrill Lynch, Deutsche and UBS Warburg. That means their research is more likely to gain the large fund managers' attention.
But it won't happen without delivery. The firm has also worked hard at relationships, as shown by its top ranking in the sales teams table.
