Pop culture has long portrayed the financial world as populated by cold-blooded lizards motivated purely by personal gain, often at the expense of the downtrodden individual. But John says that through the rise of technology, the human side of the capital markets is starting to resurface, although you probably won’t be seeing that in the movies any time soon.
Gordon Gekko. Patrick Bateman. Mortimer and Randolph Duke. The silver screen has presented us with numerous caricatures, not to mention the-based-on-real-life characters, from the finance world meant to repel and disgust us, the hard-working citizens paying for the privilege of watching these elites enjoy their status and affluence.
Of course this is the realm of make-believe and the reality of asset management is very different, but in recent years attitudes toward financial professionals and the market in general have grown increasingly toxic, particularly in the wake of the 2008 credit crisis and subsequent bailouts at the cost of the taxpayer.
As a journalist I am slightly closer to the action, so to speak, than many others and have spoken to a good number of intelligent, funny and responsible people during my time with Waters who firmly debunk the popular myths presented by film and television. (Sidenote: Before I joined Waters I covered the consumer credit and insolvency sectors, which spew out far greater levels of cruelty and inhumanity on a daily basis than investment management ever could.)
Recently, I have begun to pick up on how the utilization of different technologies is, somewhat paradoxically, bringing the human element back to the forefront of asset management.
Last year, I wrote a feature on the use of behavioural analytics in the capital markets, and while the overreaching consensus was that the technology needs a lot more work before realistic applications can be expected, the topic covers some very interesting elements around how people in the industry tick.
While much of the data that is sourced through behavioral analytics systems could be viewed as intrusive by a cynical mind—communications surveillance, controls and internal audit data all coming together to form a snapshot of a particular trader or fund manager's daily activities—the truth is that there is a very real benefit to both the firm and the individual in terms of performance measurement and management.
The buy side has been slow to embrace these types of analytics technologies, which is not surprising given their nascent nature, but over time there is bound to be take-up once tangible benefits can be displayed.
There has also been a recent growth in the demand for environmental, social and corporate governance (ESG) data analytics, whereby environmental factors, such as carbon emissions and energy usage; social factors, such as human rights and community relations; and corporate governance factors, such as board diversity and shareholder rights, are brought in to the risk measurement process.
The concept of seeking to understand and incorporate environmental and social factors into decision-making is both a pragmatic and humane one. By widening the scope of risk factors, firms are able to avoid making decisions that would either increase reputational risk or upset investors that may object to particular assets, such as tobacco, alcohol or armaments, on ethical grounds.
Should current trends continue in such a fashion, the human aspect of asset management will be brought closer to the action than ever before. Just don't expect any iconic movie characters in that vein, because that would be boring, right?
Brexit Addendum: I wrote this piece on Thursday while voting on the EU referendum was still taking place. Now, on Friday morning, the result is slowly sinking in; David Cameron has resigned, sterling has plummeted and the future is uncertain.
By 9 a.m., the UK economy had lost $350 billion and that figure is sure to fall further in the coming days. Global banks, such as JPMorgan, are already preparing for massive job cuts in the UK. Without wanting to fall (completely) into melancholy and despair, it is hard to see this result as anything other than a very dark day in this country's history.
In 2007, bankers wiped 8 percent from the UK economy and suffered the vitriol of an entire nation as a result; nine years later, 52 percent of the voting population of the UK wiped out 10 percent overnight. Perhaps instead of searching for the humanity in the banking world, those of us in what is—for now—still the UK, need to start searching for our humanity full stop.
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