A plague of locusts, a river of blood, maybe some boils?
Hello everyone, my name is Roy Agostino and I am the newest member of the Marketcetera team. I joined just as the latest market gyrations began and I am very curious on the community’s thoughts on how we will emerge from this turbulent period. From my perspective, even as we watch the latest daily storm buffet the industry, it helps me to step back and begin thinking through how current market forces will reshape the financial services industry.
Pauline Skypala, writing in the Financial Times, muses that even the term “hedge fund” will lose meaning as they converge with the traditional asset management industry. Hedge fund managers actively manage risk (and focus on absolute return), while their more traditional counterparts focus on risk relative to a benchmark (and relative returns).
I maintain that our current market travails will fuel a fundamental change amongst investors, who will insist upon much more transparency and trading strategies built around explicit risk management models. I agree with Skypala’s sentiment that asset managers will find themselves refining their focus as they move away from a “super-market” model of strategies and instead adopt a “boutique” model requiring a deeper subject matter expertise to truly generate alpha.
I also believe this emerging market will also drive a realignment of technology vendors serving the financial services industry. Industry veterans have long suffered with disparate tools never intended to work together, lengthy deployment projects, and vendors more focused on increasing “share of wallet” than customer satisfaction.
While the financial services industry was thriving and prosperous, second-rate vendors were tolerated grudgingly. This brave new world, on the other hand, will see a brutal shakeout and the failure of several sub-standard vendors. Speed, inter-operability and above all else, control will be the defining characteristics of the few software vendors left standing. The speed at which portfolio managers are able to develop and back-test a strategy, raise investor interest, and begin trading on the strategy will determine their likelihood to emerge as a leader (with all the out-sized benefits that entails) in this new era.
Control, speed and inter-operability, the watchwords of our recovering industry – in the meantime, mind the hail!