To remain competitive in the current market, buy-side firms need to juggle basic priorities – such as achieving compliance, having proper risk management and maintaining profitability – and also focus on continuous innovation.
Institutions including investment managers have been striving to keep up with a wide range of challenges such as the current regulatory environment, which is complex, always changing and frequently ambiguous. This difficult landscape is the the result of the many landmark reforms that lawmakers and regulators have enacted in the last several years.
Since the financial crisis, these key stakeholders in industry regulations have passed the Dodd-Frank Act, European Market Infrastructure Regulation and other key legislation. Various provisions of the Dodd-Frank Act have not yet been implemented, and some others are being challenged in court, which makes predicting the future compliance environment all the more difficult.
Amid this situation, some believe the regulations that buy-side firms face will likely become more severe, according to Financial News. One industry expert who shares this view is the CEO of a company that provides Enterprise Control Management solutions to financial services industry firms. So far, his company has mostly pandered to investment banks, but he emphasized that this could change.
“My heart is on the buy-side,” the CEO stated, asserting that this market will likely heat up as regulators scrutinize it more, the news source reported. “The Eye of Mordor has been pointing at banks in the past three or four years, but it is going to start focusing its gaze on the buy-side. The institutional managers particularly are going to face a lot of inspection of their practices.”
Focusing on innovation
Buy-side firms that want to keep up in this environment might want to work toward finding the best possible technologies to facilitate their data management, or alternatively, build their own. This can help them ensure that they will effectively navigate the numerous information pressures they face, which include maintaining high data quality, storing one’s information and managing expenses.
Another place where innovation can potentially come in handy is staying one step ahead of the demands of one’s client base. Sometimes, customer expectations can have an impact on all businesses, and investment managers have to eventually respond to such situations, stated Haydn Shaughnessy, an expert in structural innovation and co-author of The Elastic Enterprise, according to Financial News.
Speaking of focusing on one’s client base, many institutions are working on innovation that can support their goal of generating alpha, the media outlet reported. Buy-side firms are seeking to make use of unstructured information such as social media data, and having the right tools to help visualize this information can make it easier to interpret.
Amid this situation, buy-side firms should keep in mind that they must not only focus on overcoming their current challenges, but also ones that could crop up down the line. If they want to remain competitive, they should consider what other institutions in their industry are doing, and what they can do to not only keep up, but also get ahead.