April storms,
April showers
We live in a world of sell-side cuts,
of radical automation, of the daunting
search for liquidity and of relentless
concern over regulation. As this
month’s interviews with the buy-side
will reveal, the asset management
community is already making brave
decisions about how to adapt to
this new world – decisions which
in some cases will overturn longestablished models.
In equities, some firms are
cutting broker lists and ruthlessly
discarding products and services
that are seen as “unnecessary”
or duplicated. As Paul Weller of
British post-punk band The Jam
wrote in 1979:
“…the values that we had once
upon a time
Seem stupid now,
‘cause the rent must be paid
And some bonds severed, and
others made.”
One might well argue that these
words could apply just as easily
to the process of buy-side
emancipation and independence
from the sell-side that figures
so prominently in 2016. Shorter
broker lists, and a trimmed-down
range of trading tools such as
algorithms, may be the inevitable
price to pay in a drive to reduce
costs and boost efficiency.
In fixed income, the primary
concerns remain the search
for liquidity and the impact of
regulation, above all MiFID II,
while in FX the buy-side is faced
with the challenge of how to
optimally organise FX trading
for best execution. Our ongoing
K&KGC survey “Organising the
FX trading desk” will shed more
light on the decisions being taken
in this rapidly-evolving asset
class in the coming weeks – and
stay tuned for the full report from
K&KGC later this year.
Whatever the challenges facing
the industry, including negative
macroeconomic headwinds in
some regions and politicised
regulatory interference in others,
there is positive change as well.
The rise of information and above
all data-driven approaches to
trading are helping to increase
efficiency to levels never seen
before; this has allowed some
buy-side firms to increase their
assets under management
several times over. Among the
exciting developments pushing
the envelope this year, Big Data
has the potential to create a new
paradigm in which execution
becomes as slick and efficient
as possible within the limits of
current technology.
To end with another quote,
in March 1776, the Scottish
economist Adam Smith remarked
that “All money is a matter of
belief” – a statement that continues
to be true 240 years later. Buy-side
firms are taking the tools offered
to them by new technologies and
by changing circumstances to put
their models to the test. In some
respects, there has never been a
better time to be part of the buyside community.
We hope you had a good Easter,
and look forward to seeing you in
Asia on 27 April in Hong Kong and
Singapore, in London on 11 May
and Paris on 25 May.
Elliott Holley
Head of Global Buy-side Research
[email protected]
+44(0)7759 476779
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