BREAKING
BARRIERS
Christoph Hock, head of multi-asset trading, Union Investment
T
he future of trading lies not
only in the distinction between
different asset classes, but also
in a new model which divides
the world between high-touch and lowtouch execution – across all asset classes,
according to Christoph Hock, head of
multi-asset trading at Union Investment.
“We won’t organise the trading desk
by asset class,” said Hock. “Instead, we
will have a high-touch team and a
low-touch team. The low-touch team is
for liquid names and small trades with
very little market impact. It will be fully
automated and individual traders will
cover all asset classes. At the same time
the high-touch desk will be for very
sensitive trades, decent size notionals
and less liquid assets. And the skill set
between the two will be very different.”
Hock’s proposal is soon to become
a reality at Union Investment, where
reorganisation is already underway and is
due to be completed within the coming
months. Traders on the low-touch team
are now expected to hold expertise in
how to optimize customised algorithms,
14
how to use TCA, how to monitor the
toxicity of trading venues, and how to
achieve the best connectivity. In this
group, individual traders will trade in all
asset classes.
Conversely, the traders on the hightouch desk will have a very high degree
of specialist knowledge by asset class,
because the complexity that comes along
with these particular tasks demands it.
For example, a small-cap Spanish stock
is very different to a high-yield corporate
bond.
Union Investment estimates that it can
automate between 20-30% of its number
of orders across the whole business. The
company’s plan is ultimately to use these
freed-up human resources to additionally
focus on the high-touch trading to
generate best-in-class trade executions
for its investors.
Speaking of adding value, these days one
doesn’t have to go far to hear reports of
the wider shift of the securities markets
towards passive investment strategies.
The growth of ETFs reflects this, as these
baskets of securities essentially combine
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securities from a variety of different
indexes in a given region or class to
give investors quick and easy access
to the market. “As an active manager
seeking to identify alpha, and thereby
outperform our benchmark, the role of
our trading desk at Union Investment is
to ensure that we effectively capture
the alpha for our clients. We can
be more flexible than a passive
fund on when and how to
execute, and our traders
have the expertise and
confidence to exploit that
flexibility.”
One of the benefits of
bringing multiple asset
classes together is sharing
of market intelligence
and making use of the
combined knowledge
in cash equities, fixed
income, FX and
derivatives. Traders in
different asset classes
can learn from each
other.
August 2016