One of the major themes of 2014 was a steady drip of companies—whether giant, big or small—going public or raising additional venture capital privately. For investment managers, keeping all this straight should be a top operational and technical priority in 2015, Tim says.
Besides the Dow Jones Industrial Average reaching 18,000—however briefly—and seeming to reach new highs every week to get there, the US equities market was also driven last year by a flurry of initial public offerings (IPOs) that pulled in hundreds of billions of dollars.
Likewise, ascendant disintermediaries like Uber and Airbnb have raised record amounts of private cash as they prepare to go public—or at least ponder doing so as they stave off stringent regulation and lawsuits for a bit longer.
Whispers of a bubble emerged in the process, with particular comparisons to the dot-com boondoggle that went bust in 2000, which took with it a number of proud sell-side specialist firms and a far greater number of misplaced buy-side investments, as well.
We may not be there quite yet, but there are a couple of technology consequences to watch for, if and when we do.
For one, as the New York Times' Dealbook pointed out earlier this week, 2014's fundraising proved to be very narrowly concentrated, and especially focused on tech-enabled firms.
It also pointed out that the range of buy sides actively involved in private fundraising has expanded to include mutual funds, hedge funds, and private equity.
Given this mix, what these investors all need, now more than ever, is a tech platform to cross-monitor exposure both public and private and in terms of concentration, allowing them to properly hedge or reallocate where necessary, get organized with the numerous (and not always tier-one) banks handling the deals, and build good operational relationships with secondaries venues.
All of that sounds conventional enough, but then again it was 15 years ago too—and when the bubble burst then, things weren't all that tidy; in fact they were pretty ugly.
Therein lies the other technology interest: like all market cycles, this current one will eventually claim some victims, but in the process, some new ways of operating could just pop up.
For example, Robertson Stephens, one of the so-called 'Four Horsemen' boutiques on the US west coast in the late 1990s, did a lot of good early technology work with FIX engines and electronic trading on Nasdaq, before hitting hard times and ultimately dissolving a few years later.
And similar to Lehman Brothers' collapse, at Waters we've come across a good handful of technologists—including Robertson vet Ed Brandman, the CIO at KKR—who say they took a great deal in terms of ideas and experience from those rocky times, and put it to work elsewhere in the industry.
Technology in equities trading has come a long way since then obviously, and perhaps thinking this way is to put the cart well before the horse. But we've had enough reminders over the past few years to know that trading can still be made more efficient and more transparent.
Things will eventually overheat and correct, as they always do—with five straight losing days, perhaps they already are. Rates will rise and some investors will flock back to them, too. In the meantime, though, an active market buoyed by investor interest isn't merely good for those companies looking to IPO. It's a catalyst for the market's technology providers, too.
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails