The Asia Pacific investment community assembled at the Asia Pacific Buy-Side Summit to discuss the latest themes in buy-side management, trading and technology.
- Due to challenging market conditions, the buy-side must do more with less, and technology is the best way to gain efficiency.
- The focus of the customer basis was on finding new sources of alpha, establishing best practice regarding unbundling, and enhancing and ensuring best practice in the investment process.
- The breakout panels delved deeper into two key topics: creating workflows that generate Alpha and leveraging new technologies in buy-side trading.
The Asia Pacific Buy-Side Summit was attended by more than 300 thought-leaders, senior managers and decision makers from the buy-side industry.
The sessions highlighted the challenging but opportunistic times facing the buy-side industry, with compressed margins and increased regulation undermining margins, even as firms run larger assets under management (AUM).
However, with disruption comes opportunity, and there are many technological innovations that can give enterprising firms a leg up in this increasingly competitive environment.
The morning sessions were dominated by inspiring and insightful keynote addresses. In the afternoon, participants could choose from panel streams that examined key business opportunities in the buy-side industry.
Gaining a buy-side competitive advantage
Debra Walton, Global MD, Customer Proposition, Financial & Risk, explained how Asia’s asset management industry is rapidly changing because of the impact of transformational technology and regulations, and how adaptability will be the secret to turning these disruptions into competitive advantages.
Buy-side firms must use platforms that leverage best-in-class content, an ecosystem of partners and which area able to integrate with their bespoke technology environment.
A word cloud poll asked participants to describe the active management industry’s outlook. “Challenging” was the overwhelming response. Participants were asked in a multiple-choice poll what their greatest challenge was: 50 percent chose alpha, while 34 percent chose regulatory pressures. In a sharp contrast with their U.S. and European peers, only 3 percent highlighted costs.
A panel discussion, moderated by Debra, on the growing importance of Environmental, Social and Governance (ESG) investing across Asia, and the need to find and leverage data to make sound ESG investment decisions, highlighted that the Asian investment industry still has a long way to go in offering long-term ESG performance metrics.
Describing their use of ESG information in their investment process, 43 percent of the audience responded that they were still exploring the use of ESG data, while only 20 percent said they were meeting client requests.
Bill Maldonado, CIO Asia Pacific and Global CIO, Equities at HSBC Global Asset Management, delivered an upbeat outlook on Asian equity markets. He said that Asian economies appear to be in a favorable position compared with many other regions. Asian Return On Equity (ROE) appears to be rising, without being driven by a meaningful increase in leverage.
What role can data play?
A panel discussed how new regulations such as MiFID II, together with increased use of algorithms and artificial intelligence, are playing an increasingly large role in investment analysis. These trends raise questions over the future role of the investment research profession, and what sort of evolution or revolution the business must undergo.
Fifty-one percent of customers highlighted Backtesting and Quantitative Data consumption as their next large technology project, while 25 percent said Trading and 21 percent Enterprise Risk Management. This trend was supported by a further poll on how Asian investors saw the evolution in their research process in the next couple of years; more than 60 percent said they expect to use more data-driven research.
In the afternoon, Alpha Seeking Investment Workflows focused on data research while Future-Proof Trading Workflows turned the discussion to trading technologies.
Machine Readable News (MRN) is able to predict signals and sentiment, but it’s no easy task given the amount of unstructured data and number of news stories of questionable relevance to the company.
When polled, 59 percent said they were planning to develop research capabilities with MRN, while only 5 percent already do so. Interestingly, Chinese was seen as the language with the largest alpha opportunity in MRN, with English second.
Our business leaders shared best practices on pricing illiquid securities, explaining how a robust quantitative understanding and valuation of analyst performance can bring significant benefits to a buy-side firm in a MiFID II world.
They also delivered a case study on how text-mining based on machine learning can predict financial duress in companies.
Trading technology and buy-side
The trading technology stream analysed how various trading technologies meet the needs of different buy-side firms, based on their trading objectives.
A panel of experts discussed how the increasingly complex and technology-driven market is pushing traders to broaden their skill set and to learn to trade multiple asset classes in order to remain competitive.
This trend is highly relevant in Asia Pacific, due to the number and diversity of its markets.
Technology is not just becoming more prevalent on trading desks, it is taking over some of the jobs once done by traders. A panel discussion highlighted that although artificial intelligence (AI) enables automation of some mundane data processing jobs, there are some markets and trades that still require a human touch.
The case for alternative data
The entire summit reunited for two panel discussions. The first examined case studies of successful collaborations on our platform, while the second focussed on finding valuable signals amid the noise created by the proliferation of alternative data sets.
The alternative data panel highlighted the risks inherent in dealing with newer, less well understood content sets, and the fast rate of alpha decay as “alternative sets” become adopted by the mainstream.
While challenges are clear, there was broad acknowledgement that alternative data is a structural trend and firms need to embrace the ongoing innovation or risk being left behind.
The summit showed that our business leaders are there to listen and learn from the Asian buy-side industry.
Not only do we understand the challenges facing buy-side firms during these challenging times, but we also have the content and technology needed to support the asset management industry to turn this period of disruption into one of growth and opportunity.