After 2016, What’s Next for the Buy Side?

What to say about 2016? Turbulent, shocking, disruptive, unsettling, chaotic ... you could march an army of adjectives over the page and even that might not be enough to fully cover the past 12 months. I’m not a pessimist, but belief has to have its limits of what is and isn’t acceptable, and I think this year has pushed mine about as far as it will go.

In some ways, I am glad that while as part of my job I am constantly exposed to the rolling news circus, I’m only really concerned with one part of it, because this year has been one to put even the most experienced reporter to the test. I don’t believe I would have the tenacity to be able to write about Brexit, President Trump, or even the passing of the legendary David Bowie without sliding into despair. 

The capital markets have been relatively quiet throughout the year, but that is easy for me to say when looking from the outside in. It’s not to say that nothing of significance happened—just nothing that measures up to a new President or the UK leaving the European Union.

The foreign-exchange (FX) and bond markets have both taken substantial hits over the course of the year, which may further fuel the desire for alternative products and diversification across asset classes in the near future.

But despite all the uncertainty, there are many among the asset management community that are in the middle of their own technology projects—like the one currently under way at Schroders, as Stewart Carmichael details in this month’s cover feature—and putting the brakes on now might be overly cautious, even for the traditionally conservative buy side.

Belief has to have its limits of what is and isn’t acceptable, and this year has pushed mine about as far as it will go.

At the end of the day, the name of the game is risk, but I can’t envisage any kind of widespread significant investments in new risk systems; the technologies already in place are more than adequate (I hope) to handle the whims of a man who has threatened to dissolve large swathes of the US financial regulatory system.

Great Expectations 

What I do expect to see is the continued investment in and implementation of data processing and analytics, compliance and reporting, and decision-making systems informed by machine learning. It might not be sexy, but it’s what the industry needs. We might be living in the “post-truth” era, but the ones armed with the best knowledge are still more likely to come out on top of those who are taking a short-term view.

One particular element of this year’s Buy-Side Technology Awards stood out to me as the winners received their awards: the number of winning providers and products that had, in recent years, been acquired by larger firms. SS&C Advent’s Geneva platform, IHS Markit’s EDM and thinkFolio, and FIS’ outsourcing solutions, boosted by the capture of SunGard, were all present in the winners’ circle again this year after a significant change of ownership.

Acquisition and consolidation are of course nothing new and will continue apace, so it will be interesting to see if any results of this year’s major deals will be represented at the 2017 BST Awards.

Redi Global Technologies was among the winners this year for its execution management system, REDIplus, and I wonder what impact being under the ownership of data giant Thomson Reuters will have on the firm. Thomson Reuters clearly has plans to expand its buy-side trading capacities, but how its Eikon desktop will be adapted to suit more asset managers will be interesting to see. Bloomberg will also be keeping an eye on this space and may follow suit through buy-side focussed acquisition, even though the firm tends to prefer developing its own software in-house 

Another firm I will be keeping an eye on next year is Commcise, this year’s winner for both best buy-side newcomer and best buy-side product in the BST Awards. The London-based vendor has been impressive since launching its commission-management platform a little over two years ago, and has on-boarded some significant names so far, including AXA Investment Managers, Cheyne Capital and JPMorgan Asset Management. With commissions being a hot topic under the upcoming Mifid II regulation, I expect to see more of the same from the vendor in the coming year.