For better or worse – and perhaps like it did across all business sectors – the pandemic accelerated many of the financial services industry’s underlying trends. Overnight, almost everything was instantly propelled forward. Practices that have been holding the industry back seemingly forever – such as users’ reluctance to adopt technologies that would disrupt entrenched practices, or the way enterprises manage their resources and technology stack – suddenly shifted into high gear. Change became an urgent necessity.
The Buyside: A Technology Evolution
The Buyside has undergone a massive evolution in the past few years. Indeed, a radical transformation has re-shaped all asset management firms - and the professionals who operate within them. As a result, the needs of the Buyside are quite different now than they were just 24 months ago.
Long before MIFID2, the Buyside had been growing empowered through technology. But this revolution has been further accelerated by the rise of decentralized technologies. The world of trading, banking and financial hubs themselves are in a period of change that is directly impacting every aspect of managing and growing assets.
Over 440 banking and finance organizations – representing roughly 10% of all UK bank assets – have physically moved offices since Brexit. Alongside this, over 7,400 financial service jobs have also moved.
Cities such as Dublin, Paris, Luxembourg and Frankfurt are feeling the effects. Many firms have deliberately split their business or chosen separate cities as hubs for various divisions. Meanwhile, Europe’s stock trading leadership ping-pongs between London and Amsterdam.
But, the shifting around which is the dominant financial center overlooks the bigger transformation: the Buyside’s technology advancement.
Not long ago, the average Buyside shop had limited choices around brokers, trading systems and market connectivity. But the rise of cloud-computing and automation is having a much bigger impact on asset management than geographic boundaries.
Yesterday’s quiet world of spreadsheets has become a hum of software and lightning-fast communication. As a result, technologically, the average Buyside firm suddenly looks remarkably similar to a Sellside shop from just a few years ago.
The folks inside this new Buyside are very different from their predecessors. Today’s younger generation of Buysiders are quants, coders and data-driven technologists. Indeed, their technical abilities have altered the industry balance. Rather than being wholly dependent upon the Sellside for tech solutions, the Buyside is now building their own tools.
Yet this in-house capability also brings a new set of demands.
The asset management community needs intuitive and flexible workflows, faster communication and easier internal collaboration – and the ability to integrate all manner of best-in-class technology solutions. Moreover, they must all be applied to company-specific objectives in a bespoke fashion. In practice, this applies to apps, bots and customized integrations with 3rd party providers.
We’ve seen increasing adoption of algorithms and custom applications across the Buyside because automation is a means to scale.
For example, execution bots can instantly inform the Portfolio Manager when other funds inside the firm suddenly own a particular stock. Or they can automatically notify when a stock reaches a specified target price – without the broker or exchanges ever knowing. Similarly, they alert managers when specific cash amounts are breached. All such automations enhance critical decision-making inside those Buyside firms.
With the rise of ESG investing, the Buyside is using inputs that were previously hard to quantify, such as micro-trends from other industries. Indeed, news sentiment is now a quantitative investment factor. Portfolio Managers can actually measure how certain thematics are trading against one another. Some Buyside shops are making strategic use of social media mentions, hashtags and cashtags in their investment approach.
It’s no secret that technology creates efficiency. But the larger truth is that good technology makes your tools better, yet great technology makes your people better.
The best technology enables faster communication, simplifies your process and integrates with 3rd party solutions. On the Buyside, this is now a requirement to remain competitive in a changing world, because these capabilities ultimately drive a higher level of daily execution.
But this isn’t simply a matter of making things easier to use.
The Buyside seeks to optimize operations because of the connection to alpha generation. Essentially, money saved is money earned. Over time, better workflow collaboration becomes an investment-process differentiator. Ultimately, alpha generation attracts capital.
The big secret is that asset managers only pretend they’re trying to beat the market. Their real goal is to outperform the competing money managers in their space. That is how firms scale size and grow assets.
In today’s fast-moving markets, growth comes from greater efficiency. That means everything from integrating manual procedures to better communication, both internally and externally. All Buyside firms seek scale. Their flexibility of tools and automation of processes are the pathway to achieving this. This is why the push for efficiency continues to accelerate.
A Continuing Evolution
Symphony is committed to enabling this rapid Buyside evolution.
We make it our business to empower the Buyside. This means fostering better collaboration and centralizing communication, whether audio, video, screen-share or chat. Our tools deliver the needed flexibility through both desktop and mobile. All of this is delivered within Symphony’s secure and compliance enabling environment.
Beyond delivering bespoke solutions, we maintain several interactive initiatives on an ongoing basis. These include the hosting of our live Buyside panel at our bi-annual Innovate conference, most recently held in London; and our dedicated Buyside networking roundtables in London and Paris, which run quarterly. By ensuring such events are fully available and open to all companies in the industryand not simply our clients, we illustrate our authenticity to our commitment. Hosting and engaging in these regular conversations across the Buyside allows us to hear the direct concerns, feedback and insights which inform our product development.
As the Buyside evolution accelerates, Symphony will continue to meet the expanding needs of this new landscape through new technology solutions. Our growing footprint of 200 Buyside institutions includes many of the world’s largest asset managers – and this speaks on our behalf.
Meanwhile, we applaud the empowerment of this new breed of Buyside institution.
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