Prop Trading Evolution: Is Asset Management the Right Destination?

Sell-side institutions are in the process of winding down, spinning-off, or migrating their proprietary trading operations with the Volker rule set take effect in July (final draft still outstanding).  One of the many questions that still requires resolution: Is there one evolutionary path that makes the most sense?  Citi is winding down (via NYT) their unit, Morgan Stanley plans to spin it’s desk off, and it appears that UBS will try to evolve it’s operation into an asset management entity (BBerg).

It’ll be interesting to watch if UBS or others can pull this sell to buy-side transformation off.  Certainly, there are major differences in how a firm manages its own funds versus its client’s.  But the technology and operations that a firms uses to support the business will present a significant challenge, as well.  Sell-side technology has always been both (1) a step ahead of the buy-side due to levels of tech investment and (2) not always easily modifiable to support full buy-side requirements.  Will this capability be a help or a hindrance to the firm’s future plans?  Just another log to throw onto the fire as firms evaluate these complex decisions.

Ben Keeler