by Thomson Reuters.
The Thomson Reuters Asia Pacific Buy-Side Summit brought the Asia Pacific Investment Community together to discuss the latest trends in buy-side management, trading and technology. Here are some of the highlights:
The 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 AUMs. But 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, while participants had their choice of afternoon panel streams examining some of the key business opportunities in the buy-side industry.
Thriving Amid Disruption
Debra Walton, Global MD, Customer Proposition, Financial & Risk at Thomson Reuters (now Refinitiv) kicked things off by highlighting how Asia’s asset management industry is rapidly changing due to 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 can integrate with their bespoke technology environment.
A word cloud poll asked participants at the summit how they would describe the active management industry’s outlook, and “challenging” was the overwhelming response. Participants were asked in a multiple-choice poll what their greatest challenge was, and 50% chose alpha, while 34% chose regulatory pressures, in a sharp contrast against their US and European peers, only 3% highlighted costs.
Debra then moderated a panel discussion on the rising importance of Environmental, Social and Governance (ESG) investing across Asia, and the need to find and leverage data to make sound ESG investment decisions. The Asian investment industry still has a long way to go in offering long-term ESG performance metrics.
When the audience was asked in a multiple-choice poll how they would describe their use of ESG information in their investment process, 43% responded that they were still exploring the use of ESG data, while only 20% 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, highlighting that Asian economies appear to be in a favorable position compared to many other regions of the globe. Asian ROE appears to be rising, without being driven by a meaningful increase in leverage.
Making Data Count
The summit dug into the topic of research, with a panel discussion on 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.
51% of customers highlighted Backtesting and Quantitative Data consumption as their next large technology project, against 25% on Trading and 21% on 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, >60% said they expect to use more data-driven research.
The afternoon was split into two streams, with Alpha Seeking Investment Workflows focused on data research while Future-Proof Trading Workflows turned the discussion to trading technologies.
Machine Readable News (MRN) is an increasingly important topic within data research as it can predict signals and sentiment, but it’s no easy task given the amount of unstructured data being generated and number of news story that may not be relevant to the company. When polled, 59% of participants said they were planning to develop research capabilities with MRN, while only 5% responded that they already did so. Interestingly Chinese was seen as the language with the largest alpha opportunity in Machine Readable News, English having to make do with 2nd place.
Our business leaders then shared best practices on pricing illiquid securities, explained 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.
The trading technology stream kicked off with a look at 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 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 that traders used to do. 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 entire summit reunited for two panel discussions, one that examined case studies of successful collaborations on the Refinitiv Platform, and another that put a focus on finding valuable signals in 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” see mainstream adoption. 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 turn this period of disruption into one of growth and opportunity.