We are constantly being bombarded by stories of economic doom and gloom. Inflationary pressures, rising interest rates, recession fears, financial impropriety, bank failures, layoffs…there is no shortage of anxiety inducing headlines to get your day off to an inauspicious start each morning.
For those of us of a certain age, none of these market fears are new or surprising. We’ve heard all of this before. Economic risks are a de facto part of everything we do on the buy side. Cycles go up and down. With each twist and turn in the market, we are provided with an opportunity to capitalize on our prior efforts and prepare for the next run of events. The panic and irrationality that drives some to run for the exits only exacerbates angst and locks in their losses. The victors understand uncertainty creates opportunity to get ahead in this ultra-competitive industry.
We’ve partnered with some great clients through the years and our collective hindsight built from those experiences provides rich fodder for helping us navigate today’s challenges. Concentrating on things we can control to advance our mission despite the headwinds of the moment reveals opportunities for asset managers to capitalize on during market downturns. Here are a few ways we've seen operations and technology teams help support the business and come out ahead during times like these:
- Hunt for and eliminate non-critical customizations in your operations and technology platform. Customization is a lot harder to maintain in an environment where macro financial pressures are putting the squeeze on operating models. However, adoption of standards can be a difficult trade-off. To get started, you need a sound methodology to help guide the process which focuses activities and deliverables clearly among the skilled people who will create an inventory of custom processes then score each item against cost and benefit factors. It’s critical to wrap this work with sound governance for decision making and prioritization, ensuring maximum benefit is derived from the level of resource capacity available.
- Invest in data and analytics. During the credit crisis in 2008-2010, rather than just slash budget and hide, we worked with a Chief Investment Officer who had the courage to invest in deeper analytic capabilities. A close look at the pain points the investments team was facing during the thick of the crisis revealed some key themes around data. When addressing questions from internal and external stakeholders, the legacy data architecture highlighted glaring limitations that needed to be addressed. Stronger alternative data sources were needed urgently. Portfolio managers and analysts collaborated with the data management team to cultivate new data sources that provided better insight into key factors that influenced portfolio allocation decisions and reporting. Needs were prioritized, and both short and long term plans were put in motion. While many peers were stalled by flawed credit ratings, we were busy charting our own course and getting new types of data needed to manage risk and returns in line with the clients’ appetite. This effort paid significant dividends as their recovery outpaced the market and put them in a position of strength going forward.
- Partner up with vendors and service providers who can lighten the load. We advise clients to get out from under the weight of burdensome legacy technology and take advantage of the scale newer solutions can offer. You need to seek partnerships with organizations and teams who understand your mission and complement your capabilities. Outside perspectives can help firms see things through a different lens and offer additional perspectives to help build resiliency needed for the challenges of today and tomorrow.
While so many are burdened by the weight of these demanding times, the leaders of tomorrow are seizing the opportunity to get ahead. Companies that only invest in themselves when the seas are smooth often find it difficult to advance beyond the pack. It’s not easy to adjust the competitive balance, but adversity creates opportunities for those willing to break from the crowd and get ahead. As the cycles of the past have taught us, perseverance and courage rewards those who act over those paralyzed by the pressure of uncertainty.