Previewing technology strategy implications for the buy side in a time of structural change and market turmoil
Abstract
Profound shifts continue to alter the investment industry’s economics. Buy side firms that adopt an active approach to managing portfolios are faced with immediate business challenges that are born from the waves of regulatory interventions, fee compression trends, and broader capital demands. These effects are compounded in a time of market turbulence, with haphazard geopolitical postures, and fragile macroeconomic conditions likely to provoke futher regulatory reactions at shorter notices in the coming year. At the same time, longer-term structural factors around technology, data availability, and digitization are demanding that firms respond more strategically from a business model and operational perspective.
Through the current turmoil of markets especially, investment firms are looking to respond more quickly with up-to-date, granular insights into drivers of risk and performance, and to formulate forward-looking actions. This isn't merely about more quantitative metrics or business-as-usual reports. Instead, there are growing ambitions among leading firms to reconfigure, align, and connect different data ecosystems from within and without the firm to enhance portfolio design capabilities, generate predictive signals about market dynamics and investor sentiment, and dynamically anticipate shape market turns.
Although not a panacea, digitalisation, technology, and data play a critical role as catalysts and facilitators to navigate a fast-changing environment. When executed, the change journey can pay dividends to enable investment managers to sharpen the edge in uncovering alpha and improve resilience.
In this report, we highlight the business and technology dynamics pertaining to what new themes are emerging, and where existing themes will accelerate in 2023, specifically with a buy side lens. This year, we start by identifying five industrywide business shifts and the macro drivers across capital markets and investment sectors that are driving technology spending and strategy for 2023. The themes have been identified by the Capital Markets team based on our research and discussions with industry executives throughout the past year. We also highlight the key technologies relevant to each theme.
This previsory edition for the buy side is a companion report to two other editions for the sell side and post-trade financial market infrastructures.