[ F I N A L T H O U G H T S | E R G O C O N S U L T A N C Y ]
Teamwork still makes the dream work
Another year , another survey . The buy-side is as split as ever it was , divided on the subject of outsourcing , one of the most divisive topics in our industry . A topic to polarise a conference debate . Even something to prevent old friends from having lunch together ?
As buy-side consultants specialising in execution and all things that hang off it , we have certainly benefited from and be penalised for covering , developing and promoting outsourced trading in all its guises . However , when speaking with and working for some of the most forward thinking buy-side firms , wealth managers and asset owners through the course of our “ Best Execution as a Service ” product , it is thankfully clear that teamwork , cooperation and collaboration are still the most effective weapons of choice for progress , development and improving executions for all . Better executions are still the end game here .
With opinions split on the buy-side , the trifecta of views on outsourced trading : Those for , those against , and those yet undecided have been debating long and hard from trading rooms across the world right into this second annual Outsourced Trading Handbook . Unsurprising then that all roads still lead to co-sourcing , the theme of 2024 , and sure to be the theme of 2025 . Especially as the larger players continue to make larger moves in the space and larger clients continue to outsource the inefficient and underperforming areas of execution .
Co-sourcing may be a new name , but it is only a new name for the oldest of terms – teamwork . Since the late 1990s in London , and significantly earlier in the US , hedge funds have always partnered extremely closely with their prime broker , from stock lending to financing to settling all their trades . Co-sourcing , partnership and trust . The long-only relationship with its own custodian has been a relationship pivotal to the operational , marketing and developmental success of the asset manager themself . Co-sourcing , security , and safe keeping .
The execution landscape does not get easier . The evolutions in the last 12 months alone have been significant in size and workload and have also been a portent on things to come . As discussed in this document , the outsourced trading landscape has evolved significantly over the past 12 months . It is already clear that the settlement cycle on every asset class in every geographic location will be reviewed and probably changed following the successful move introducing T + 1 in the US . This work by the industry was yet further evidence of the success that can be achieved by working together with your external stakeholders . No firm is an island , no firm beyond cooperation .
Outsourced trading does divide , it is controversial , and it can be extremely difficult to get right . This very handbook highlights some of the risks , problems and expectations that need to be explained and then managed . However , the growth highlighted also within these pages show that it is being done , and it is being done right . The industry is maturing , and this survey is documenting it , highlighting again that by working with a trusted partner a greater and better outcome can be achieved over working alone , maybe it was forever thus ?
It is not a case of ‘ always outsource everything ’, or even a case of standing still and claiming that everything is done perfectly internally - it is a journey , an evolution to a place where more options are considered and the right answers arrived at for the firm , the firms ’ clients , the owners and the regulators .
It is this teamwork between a buyside firm , their execution consultants , their external execution relationships and partners that makes the astonishing progress seen in this industry possible . Co-sourcing , co-operation , and collaboration have always driven the execution industry from the day we started working in it . They all still do .
Michael Broadbent Principal Consultant - Ergo Consultancy
62 // Outsourced Trading Handbook // 2024