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CFA Society SL to upskill analysts to uphold investment research standards

Commercial-Credit-and-Finance

The much-awaited annual CFA Society Sri Lanka Capital Market Awards will be held for the 11th year on 18 June 2024 at the Cinnamon Grand, Colombo. Today, it is among the most sought-after accolades that recognizes and rewards excellence in the local capital markets.

The investment research industry is at the center stage of the event, with CFA Society Sri Lanka awarding the top talent in the industry, including the best research report, best sector report, and best research team.

Collectively, these awards take into consideration fundamental analysis capabilities, supportive valuations, the reflection of current macro and
company trends, and the consistency of coverage by the research houses.

Sri Lankan investment research industry now increasingly focused on fundamental analysis

Over the past 15 years, the investment research industry has evolved into a more fundamental analysis-centric one, with an increased breadth and depth in stock coverage.

Company analysis is also now supported with in-house macroeconomic and industry research, providing investors with a holistic view of both stocks and other factors that impact trading decisions.

Additionally, in the recent past – driven mainly by foreign investment requirements – there has also been an uptick in investor relation (IR) activities among listed entities, which has provided further backing to stock analysis and recommendations.

Supported by these changes, the overall opinion of fundamental analysis, in particular of retail investors, has seen a marked change. Apart from the usual assistance of investment advisors, investors now increasingly seek well-researched company analysis, and opinions of analysts on company activities and macro conditions, supported by technical trading advice
as and when required.

Upskilling analysts at the core of maintaining industry standards; participation of all industry players necessary

With the onset of the pandemic and the economic crisis that followed in 2022, the country witnessed a significant brain drain, with the investment research industry seeing the exit of trained and skilled analysts.

Speaking of talent migration, Buddhika Fernando, CFA – Chair of the Judging Committees for the Best Equity Report and Sector Research Report Awards – observes: “The demand for highly-skilled international workers is now so intense that it is called a global talent war.

Talent migration and brain drain is certainly a concern; however, we cannot stop it and our focus should be on how to bring overall benefits to the country by successfully managing talent movement. Research analysts must be considered long-term investments and research houses should manage remuneration better, and invest in training and upskilling, thus communicating to analysts that they are valued and that there is room for career progression.”

She further notes that the industry as a whole, including institutes such as CFA Society Sri Lanka, should take the initiative to train the next generation of analysts, not just to offset the skills migration, but to support the development of analysts who can compete at a global standard: “Where you work from is almost a redundant question now, and the skills and talents of trained and experienced analysts can be obtained wherever they are located, provided the right incentives are offered.”

As research houses continue to revamp their teams, Buddhika comments that “there has been a seismic shift in markets following the pandemic and the financial crisis. New analysts must be equipped with broad knowledge of industries, macro conditions, and the ability to read underlying trends amidst other noise. These should be complementary to your
fundamental analysis skills and knowledge of valuations. Of course, ethics and a commitment to excellence are a given.”

Speaking of more developed markets, Buddhika notes that research standards are driven by the demand for sound content by institutional investors and regulators who set clear standards for the dissemination of information to all investors. Analysts are ranked for consistent coverage and held accountable for their stock recommendations, promoting
ethically driven research. The research houses themselves invest in top talent while also developing the next layer of analysts (associates), enabling the houses to expand the breadth of coverage.

CFA Society Sri Lanka affirms its commitment to aiding the analyst upskilling journey

Since its inception in 2012, the CFA Society Sri Lanka Capital Market Awards has continued to define some of the key standards for the research industry, with judging criteria that have evolved over time to match global industry standards.

The event also recognizes IR teams that interactively communicate with the investor community and encourages best practices in IR that are supportive of informed and efficient capital markets.

Additionally, the CFA Institute Research Challenge Sri Lanka is a testament to CFA Institute’s commitment to upskilling university students at an early stage as financial analysts.

Participants are tested on their analytical, valuation, report writing, and presentation skills, combined with intensive training in financial analysis and professional ethics – gaining real-world experience on the requirements of a research analyst.

In 2024, the CFA Institute Research Challenge Sri Lanka drew in participants from 20 universities consisting of nearly 100 students across the country, competing to enter the final global challenge organized by CFA Institute.

This in itself annually provides the industry with trained personnel to aid with new talent acquisition, offsetting the impact of ongoing talent migration.

In addition, CFA Society Sri Lanka also works together with the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE) to improve the financial literacy of the general public, including investors, which in turn has improved the demand for fundamentals-driven research.

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials with over 190,000 professionals in 164 markets.

Founded in 2001, the CFA Society of Sri Lanka is a not-for-profit organization supporting the professional development and advancement of CFA charterholders and candidates in Sri Lanka. Its membership of over 250 members consists of CEOs, CFOs, portfolio managers, equity analysts, banking professionals, investment advisors, and other senior-ranking
financial practitioners, and over 300 candidates, mainly in the financial sector.

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