With Intelligence recently hosted Part One of its HFM Asia Operational Leaders Summit 2022 virtually, bringing together the APAC hedge fund community for a day of informative panel discussions, presentations, and discussion groups. FactSet’s Manu Sharma, Head of Trading Solutions for APAC Sales at FactSet, participated in a panel during the event entitled “The Meshing of Technology and Human Interaction.”
Below is a summary of the key points Sharma made during the panel discussion.
Culture and Technology Go Hand in Hand to Drive Efficiency
We often see clients relying on spreadsheets to drive their processes. While Excel is a powerful tool that can be implemented quickly and easily, it lacks scalability and auditability. In my view, this “spreadsheet culture” is created because a solution/technology is deployed as a one-stop-shop; however, when the solution can’t cater to a firm’s requirements, a spreadsheet is built to fill the gaps. As the firm grows and workflows become more complex, that spreadsheet becomes a behemoth—that's how the spreadsheet culture started.
If we take a step back and examine this, technology providers have a responsibility to act in their clients' interest rather than trying to sell a one-stop-shop solution that promises to do everything. Technology providers need to put the client first and not push generic, standardized solutions that maximize their revenue but rather present how their solutions can work with other solutions to provide the best fit for the client. It sounds a bit counterintuitive to introduce your “coopetition” into the picture, but this is the year 2022, and this is how technology providers need to behave—as partners.
Technology providers need to work in partnerships with the client and build a more robust ecosystem that is scalable to other clients.
Obviously, you cannot solve for everything, so there will be instances where there will be spreadsheets. But this should be taken as an opportunity to address the specific need in your product roadmap; if one of your clients is having such issues, other clients are having similar issues. This is an area where technology providers need to work in partnerships with the client and build a more robust ecosystem that is scalable to other clients.
Balancing the Human Aspect of Funds with Technological Efficiency
There always needs to be a balance between firm culture and efficiency. As an execution management system (EMS) provider, we offer multi-asset-class trading that can offer fully automated or fully discretionary trading. We balance this choice with the markets in which clients trade. For example, firms can have fully automated trading for equities and exchange rate (FX) products but for fixed income (FI), they trade over voice—the liquidity in the FI market simply doesn’t support fully automated trading; hence, human input is required to generate alpha.
On the one hand, technology providers need to push the envelope in terms of technology but on the other hand, the solution they deploy to clients must match the current market structure to provide the best possible market access. Two decades ago, most FX was traded over voice—technology providers helped bring electronic liquidity to the market. We’re now seeing the incorporation of artificial intelligence (AI) and machine learning (ML) in trading systems—this will further push innovation.
The way we work with clients has completely changed, just in the last two years. Prior to COVID, when a client was going live on any system, you had people on site, physically sitting with the traders. But over the last two years we've brought numerous clients on board with no physical interaction—it's all been done remotely.
Our daily interactions with clients have changed, too. We don’t only speak with people at their desks—people are now reachable via cell phone, Zoom, Teams, etc. The whole work/life balance has shifted. Previously, the financial industry would force people in higher roles to be in certain locations. But now, it's about capability. If there is a person in a different part of the world that is best suited for this role, physical location is no longer a hindrance to getting talent.
COVID has forced us to be more inclusive—we're all more closely connected and working better with each other, both within and between organizations.
As an industry, I would say COVID has forced us to be more inclusive. We're all more closely connected and working better with each other, both within and between organizations. This has driven a culture that generates more ideas and better collaboration.
The biggest challenge for companies now is how to get people back into the office. Many companies are reducing their office space, but to what extent will offices become more of a collaboration house? Employees won’t be tied to their chairs; they’ll be in the office for internal/client meetings and collaborations. That culture will progress as people start going back into offices—it will be interesting to see how this evolves.
Build Vs. Buy
As operational leaders are trying to lower the total cost of ownership and maximize innovation, what is the right balance? Do you go with a service provider that does everything for you or one that provides most of what you need and build spreadsheets around it? Or do you try to bundle products from different providers, resulting in ballooning costs but making you the most robust provider? Operational leaders need to really have a balance.
Leaders need to be nimble and forward-looking when selecting technology providers.
Leaders need to be nimble and forward-looking when selecting technology providers. Instead of looking at what solves problems today at the lowest cost, they need to look at solutions through a future lens and search for solutions that are scalable and interoperable with other technologies.
We used to ask, “What are your challenges today?” But I think the right question to ask now is, “Where do you see yourself headed?” Say you're starting a hedge fund today, a long-shot hedge fund with assets under management of X. Where do you see yourself going? Where is this journey taking you?
As technology providers, we are in a really good position to advise what is the best technology that will remain scalable. It might be a little bit more expensive on day one, but that is ultimately something that helps you get to where you want to go. We are investing a lot today in APIs and interoperability. It’s not about just having a box or a mousetrap that is the prettiest and does everything, but really seeing how we plug into some of our coopetition to provide that holistic picture to the client.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
Mr. Manu Sharma is the Trading Solutions Head of APAC Sales at FactSet. In this role, he is responsible for growing the Electronic Trading franchise for FactSet throughout the region. Mr. Sharma brings 12 years of industry experience to the role, which promoted the best practices of multi-asset electronic trading for Bloomberg. During his tenure, he successfully advanced the electronification of complex trading workflows across numerous markets in the region, capturing market share for their multi-asset class trading solutions. Mr. Sharma earned a Master of Science in Global Finance from New York University.
The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.