Buy-side Perspectives Issue 9 | Page 5

The evolution of Asset Management and increasing pressure on the buy-side trader Taking a helicopter perspective of the changes in the asset management industry, it is no wonder that the buy-side heads of trading are under tremendous pressure to perform and change management is becoming business as usual. Looking into the rationale for a number of the take-overs in the last years, we can identify common trends that are predicting the future of the asset management industry: 1. Rising costs from increasing regulation is putting pressure on the firms to achieve more optimal economies of scale with automation and managing mid and back office operations. 2. The buy-side firms need to extend its distribution networks to cover rising costs and demonstrate growth. 3. Asset management firms are acquiring to gain local presence and global reputation as the national authorities are pushing clients towards more future looking critical savings in the capital markets. The clients are looking at: a. Lower risk diversification in safer and more passive investment instruments. b. Investing with Asset Managers who have recognised credible brand names. 4. The demand, accessibility and cost differences between commoditised and specialised financial instruments such as small/mid cap, emerging markets and high yield are widening. Only a few buy-side firms will survive based on a high level of specialisation. 5. With high entry requirements for public listings, the private capital market is an increasingly attractive alternative for investors. Summer 2017 The heads of trading need to adapt to the mergers and take overs and demonstrate their value- add in the investment process and why the execution desk needs qualified staff over and above automated low touch. It will become increasingly important to be able to articulate the benefits of retaining the execution functions in-house vs. outsourcing. As if all of these pressures are not enough, the sales trading desks are also being more streamlined and regulatory transparency are forcing the brokers to charge for add-on services which ultimately transfer additional workload and responsibilities to the buy-side trading desk. Kristian Karppi Managing Director K&K Global Consulting We at K&KGC have recognised a dramatic shift in cultural behaviour over the past 3 years where the buy-side traders are increasingly pressed on time and need to prioritise their activities to survive their working day. While some buy side feel they can no longer take time away from their trading desk, others have realised the increasing value of interacting with their peer network to remain on top of the game and in worse case, know who to contact if one is made redundant. In some cases, it becomes apparent that the buy-side firms are streamlining their trading desks to the extreme that there is no longer a contingency plan for holiday or sickness cover. K&KGC’s vision is to support the individuals in our global buy-side community in this increasingly pressured environment. We are also happy to support buy-side traders who find themselves in the unfortunate position of redundancy, to stay in touch with the industry. www.buysideintel.com 5