Buy-side Perspectives Issue 3 - Page 3

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 eholley@kandkgc.com +44(0)7759 476779 3