Research house Standard & Poor's (S&P) has defended its manufacturer-pays model, saying it increases transparency at a number of levels, despite acknowledging it leaves the research house beholden to the wishes of product manufacturers.

In a white paper examining the three most common business models used by Australian investment research houses, S&P said its model creates transparency and a wide dissemination of information.

S&P said the manufacturer-pays model allows fund ratings to be provided to all investors for free, leading to "education of the marketplace, [which] is necessary to avoid potential misuse of fund ratings".

The research house also said the manufacturer-pays model allows it greater access to information relating to fund managers, "because fund managers have initiated the engagement and are motivated to provide the highest levels of transparency".

However, this model can work in both directions, the research house acknowledged. For example, "when fund managers cease paying for fund ratings on certain funds due to changes in marketing strategy or unhappiness with the rating".