Archive for the ‘Innovation’ Category

Strategic Trends for Global Asset Managers

2013-07-03 16.30.18In the years since the 2008 financial crisis, we have seen major shifts in trends influencing growth in the global asset management industry. Four key changes are significantly affecting strategic thinking in the industry:

  • A continuing movement towards bifurcation of vehicles that provide “alpha” and “beta” exposure to market returns. This isn’t by any means new news, but we feel that this is clearly understood by professional investors, but is not fully understood by most non-professional investors. The impetus to find value for fees paid will accelerate the demand for “beta” products further which will cause a sea-shift in assets. Interest in index funds and ETFs will increase even more than they have in recent years.[more…]
  • Increased volatility in the market coupled with increased difficulty in identifying uncorrelated returns will push many alternative strategies into the limelight. Expertise in global emerging and frontier markets, private equity, quant and derivatives-based strategies are becoming the core way of generating any portfolio’s “alpha”. The game is up for those managers that are trying to sell what is effectively beta as alpha.

  • A global macro context is becoming core to any portfolio strategy, including those that bill themselves as focusing on a very targeted market. Even some of the most basic fundamental domestic equity portfolios are now subject to impacts from global markets. It’s becoming less relevant to specialize in one country, region, asset class, or sector. Asset allocation is becoming a more important overlay, especially in understanding movements in correlation over time and ability to shift strategy as correlations shift. Because of massive US corporate investment in China, for instance, many funds that bill themselves as US equity-centric may actually have huge China exposure and need to be managed as such.

  • It’s becoming much more imperative to be able to clearly communicate a firm’s expertise and points of differentiation. The days of asset managers being abstract or vague about their investment philosophies are quickly coming to an end. Many hedge funds and other specialized firms will gain favor because they provide unique value propositions that are not currently offered in the marketplace. What will be critical for their success, though, is the creation of a strong, recognized brand and clear messaging about their differentiation. Additionally, they will need to develop a highly efficient sales organization that can carry that message to investors. As successful as some investment strategies are, the ability to clearly (and sometimes simply) articulate why these strategies are worth investing in is just as important. This is no small effort and should be a core part of the business strategy.

We feel that there is still significant “life” to the traditional fundamental asset management model, mostly because of the huge asset pools that sit in those strategies today and the inertia built into these. But we think that this will shift very soon and very rapidly as competition accelerates and the industry continues to consolidate and chase limited opportunities. The firms that prepare for these shift will be the ones to thrive.

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What Does It Mean to ‘Collaborate’ in an Organization?

WalkWe have been having a lot of discussions recently about the definition of collaboration. For most of our clients, increasing collaboration is one of their ultimate goals. But what does it mean to increase collaboration? At first thought, it would seem obvious what it is: increasing the amount of communication exchange among team members in order to identify new opportunities to increase business. The natural next step that sprouts from this conclusion is to invest in technology solutions that allow for an exchange of information: CRM, instant messaging, collaboration sites like Sharepoint.

These tools facilitate collaboration, but they don’t in and of themselves create or inspire collaboration. Collaboration is at its core a cultural phenomenon. Collaboration springs from the development of a community that has shared interests and common goals, and clear visibility of the path to take to reach those goals.[more…] Organizations need to develop a culture where everyone buys into the idea that sharing information benefits the greater good of the firm. Leadership sets the cultural agenda, by creating principles and providing guidance on expected behaviors.

At this point in the conversation is when we start to lose our more systematic-minded peers, who object to the abstract direction of the discussion. In their view, people by nature want to collaborate but there are systemic barriers that prevent the free exchange of information. They feel that these barriers can be broken down with the use of technology. They state examples of how new media has expanded the ability to share information which, in the cases of Wikipedia and Twitter for example, are being done with little financial incentive. It’s human nature to share.[more…]

It’s important to try to balance the two dimensions; they work in tandem. You can have an organization where everyone buys into the benefits of sharing information, but without the tools that enable a free, relevant, and targeted exchange, people will easily give up. In firms with the right culture but the wrong systems, people will want to collaborate, they can’t, and they will feel guilty about it everyday. Alternately, you can have an organization that spends millions of dollars on any variety of tools to talk to each other, but no cultural transformation to buy into a broader benefit, then the investment is completely wasted. Worst of all, these are usually recurring costs.

The leadership of any organization needs to understand how interrelated these are and have a coordinated plan to address them. In the simplest terms, they represent the ‘why’ and ‘how’ of collaboration.

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Top 5 Technology Priorities for Capital Markets Sales in 2013

Fave_modHere are our top 5 technology priorities we see Capital Markets organizations focusing on this year:

1)  Increased leverage of existing data

Broker-dealers capture an incredible amount of data, partly for compliance purposes, but also from systems that have come on line in the past 5 years aimed at capturing both client and sales interactions. Firms are sitting on immense repositories of trading and client information but have not had the systems or resources to mine that data to create a competitive advantage. New technologies have dramatically driven the cost down of storing, retrieving, aggregating, and analyzing the data. We’ll see firms combining phone, messaging, and email data with transaction and market data to develop new insights about customer and market trends.[more…]

 

2)  Mobile integration

As more people become dependent on their mobile devices to manage their personal lives, they are going to look to manage their work life in the same way. This means a higher degree of mobile integration of their work applications. There are many difficult and unresolved technical and compliance questions, but we feel that firms that have invested in mobile and BYOD (Bring Your Own Device) infrastructure over the past two years will see significant realization of productivity this year.

 

3)  Migration to the Cloud

Security has long been an issue with financial firms (especially in securities firms) when talking about hosting sensitive internal data on the Cloud. We believe that new security advancements in Cloud computing will allay most of those fears and will compel many firms to revisit this option since it provides advantages in cost, stability, and accessibility.  As mentioned in the last point, mobile will become a big priority for productivity, but would be severely constrained if data has to sit in slow and inaccessible local servers.

 

4)  Incorporation of social media

Social data, meaning data from social internet sites such as Twitter and LinkedIn, will be made more readily available, if not to all sales and trading staff, then at least to a critical beta group. LinkedIn data is being made available for integration with in-house CRM systems so that internal contact data can also feature LinkedIn profile and company information. Most CRM systems worth their salt have recently built LinkedIn data integration capabilities. Many firms still haven’t seen the value of Twitter, with most firms blocking the application entirely. But a few upstart Twitter analytics firms, with access to Twitter’s data fire-hose and some serious data analytics engines, are providing extremely useful insights on market and client trends. The most notable is Dataminr, which focuses primarily on financial markets.

 

5)  Mining of unstructured data

We now have technology that can systematically ferret out and analyze information from unstructured data sources, such as text in emails, client call reports, research reports, and even phone conversations. We admit that this will be more of a 2014 focus for most firms, but many will start to look into it this year since it can provide a significant new stream of data to analyze.

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Challenging Your Creativity

I had the privilege earlier this year of participating in a very unique performance called ‘Choreography for Blackboards’, which had me drawing (and erasing) whatever came to mind on a standing blackboard for 90 minutes in front of a paying audience. You can read about my experience here: http://www.ps122.org/ivan-martinez-on-why-ps122/.

I think everyone, especially those of us working in sterile financial services environments, should find opportunities to challenge our creativity. Creativity is a muscle that if not exercised, withers. It’s so important as a key differentiator in the marketplace.  When thinking about engaging and advising clients, it’s important to step back and think about whether you are providing the same canned story, or whether you have thought about creating the most innovative solutions. It’s way too easy to fall into routine thinking patterns.

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Oboe Partners: Our Strategic Framework

We specialize in developing strategies that create sustainable competitive advantages for our clients. We realize that this statement is filled with a lot of management consulting speak and can sound empty or frivolous. But our strategic framework is based on a deep understanding of industry dynamics, analytical rigour, and technical expertise. These are the basis for the development of strategies and executable plans that change decision-making and behavior.

We apply our framework to four kinds of engagements:

Development of client-oriented strategies

  • Evaluate / target new markets and opportunities
  • Create new product distribution strategies
  • Develop strategic plans and set targets for sales and client service teams
  • Professionalize client management / client service functions that enhance sales and relationship impact

Develop understanding of client segmentation and client profitability

  • Identify and define key client segments and sub-segments, and uncover their drivers
  • Develop behavioral client segments that better represent effort and client characteristics
  • Create detailed analysis of client and client segment profitability
  • Activity-based management analytics

Optimize organizational design

  • Recommend optimal team structures aimed at gaining profitable market share globally
  • Create policies and processes to increase workflow efficiency and information sharing

Apply the best technology solutions to increase insights, productivity, and collaboration

  • Big Data
  • CRM and collaboration tools
  • Analytics and MIS
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Oboe Partners: What We Do

OWe established Oboe Partners as a strategy consulting firm with the philosophy that in order to deliver game-changing solutions to our clients, we need to provide not only market context, insight, and advice, but also nose-to-the-grindstone plans to realize the vision.  We have experience working closely with senior management of broker-dealers and asset managers on a variety of assignments that has helped them better operate in a market that is becoming increasingly challenging and competitive. Because of our experience in both the buy-side and sell-side, we understand the full investor value chain which helps us provide unique insights and solutions.

We start with an evaluation of the market space to understand market trends, competitor’s positioning, and most importantly a clear articulation of client needs. Next we do a full, unbiased accounting of our client’s market positioning, strengths, and gaps. Once we fully understand the market and our client, we create innovative recommendations intended to affect strategically significant change. Because of our extensive experience in not just strategy, but in implementation, we create plans for process improvements and platform investments needed to drive change and efficiency.

We’ve applied this discipline to many successful client projects, including entrance into new markets, new product launches, development of new platform capabilities, joint venture and other strategic alliances, and creation of efficiencies using technology and innovative organizational design.

Once these initiatives have been implemented, our engagements often extend to include ongoing measurement and benchmarking of performance. Because we have a strong capability in data and analytics, we help our clients develop analytical tools to help them measure success and deliver real-time information.  We’ve implemented performance dashboards, profitability analysis, and predictive modeling that helps our clients track progress and make changes that will steer their organization across the choppy competitive landscape.

 

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