Cost-cutting has been a go-to for many buy-side managers since the financial crisis, as fees, and therefore margins, slumped while regulatory outlay soared. But 10 years since the darkest days in investment management, a corner has been turned.
The 100 buy-side firms we spoke to for this year’s industry survey displayed a forward-looking, can-do attitude and an appreciation of a new era of automation and technology that could help them regain lost ground. Interestingly, the survey found that asset managers and asset owners were aligned on their views regarding challenges and how these need to be addressed.
Rather than dig ever deeper to scale back outgoings, buy-side managers have decided to grow their way back to good health by gathering more assets and seeking out enough alpha to put them ahead of their competitors.
But in 2019, getting ahead of the competition no longer just requires the best investment ideas. Asset managers need operational back up that can support an ever widening range of strategies and a deepening pool of non-traditional securities. Here they face a challenge.
Decades of M&A in the asset management sector, along with years of unit heads independently picking best-of-breed trading, reporting and accounting solutions, has resulted in a tangle of siloed legacy systems that are no longer able to communicate.
All the while, there is a reliance on manual processes to support vital functions in the world’s largest financial hubs, which managers are only now seeking to automate.
The front office needs to be able to work from comprehensive data sets that are accessible up and down the execution chain. Having access to uniform, accurate data, which can be understood and evaluated by every link in the investment chain, is rapidly becoming the standard by which all systems are measured.
Once centralised and standardised, this data can be used to carry out increasingly technical performance measurement analytics that can show managers the true value of their trades – either good or bad.
Having total control of the design and access of these programmes is something asset management chiefs now realise can add to performance as well as smooth internal operations.
This pivotal data hub can help to establish the foundation of an even more advanced future. Managers may use it to explore how AI, machine learning and other emerging technology can open up new opportunities, and help uncover faults which may have lay hidden for years.
In a market that has rediscovered its will to win, the agility and quick response times that can be achieved by using automation and sleek, unified systems will separate the winners from the losers.
And in this new world order, where outperformance is the goal, seamless operational excellence is key.