This year has played host to a record amount of elections globally, with half of the world’s population voting in or out their governments.
In the financial world, we often focus our attention on trying to understand the impact these events may have on a particular asset class. While the impact on portfolios takes up much of the conversation, the logistical challenges for asset managers in responding to market-moving events is not often discussed.
So, what are some of the logistical challenges asset managers face leading up to, and in the wake of, a market-moving event?
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Sam Idle, consultant at Clearwater Analytics and former head of client reporting at M&G, says that one of the biggest problems for asset managers around major events is being able to access up-to-date data so soon after month-end.
Asset managers often get hit by waves of client requests for information in response to such events.
Idle says that the response is more straightforward when results are widely expected – such as Labour’s election victory earlier this year, which had been widely forecast beforehand. This allows asset managers to be better prepared for the data requests they may receive.
However, Idle says that challenges arise when something happens that is unexpected. “This was a big thing we had at M&G with Brexit,” he says. “When the Brexit result came in, the FTSE tanked and everyone was trying to work out their exposure to the UK.
“We had done all this work in advance and we were sat there feeling quite smart, firing out these reports. Then at around lunchtime, the FTSE bounced back, and the DAX took a tank.
“No one had ever thought to do the same reports for Germany. So all of a sudden, our client service teams were getting phone calls from clients saying, “I get that you sent me this on the UK, but what’s now happening on the DAX? What’s my exposure to German government bonds?’
“We didn’t have that information to hand, and we were struggling to get that because of the proliferation of data sitting in different places.”
Types of request
In terms of the types of requests received, Mirabaud Asset Management’s head of UK wholesale Benjamin Carter says: “Essentially, we receive two types of requests: unique, ad-hoc requests from a client — such as for specific data — which we deal with on a one-to-one basis; and key topics of interest such as responses to events which will be communicated to a number of clients.
“We will often try to pre-empt these to ensure a quick response, gathering information from our subject matter experts and preparing a communication for distribution to all relevant regions. We find that a culture of sharing client feedback and insight across our Sales teams is very helpful in understanding and anticipating what clients will be looking for.”
Idle says that while technology and the availability of data is improving around this issue, he feels that more can be done to improve the technology around asset managers’ response in reporting.
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Jeremy Katzeff, head of buy side solutions at GoldenSource, adds that advances in data management technology have been transformative to the way asset managers respond to almost all client requests surrounding major geopolitical events over recent years.
“Most external requests ultimately come down to clients seeking specific data – whether it’s insights into market volatility, detailed analysis of sector-specific impacts, or updates on global asset allocations.
“Firms farther along in their digitalisation journey are usually equipped with more sophisticated data management infrastructures and interfaces, enabling them to centralise, normalise and standardise a vast array of investment data from right across the organization. This helps provide clients with quick and easy access to the information sought, even in real time.
“It is typically the larger asset managers that boast these capabilities, but smaller, boutique players are increasingly looking to bolster their data warehouses as enterprise data solutions continue to become more accessible and scalable, thanks to advances in areas like cloud computing.”
Mirabaud’s Carter believes that a boutique structure can help to communicate with clients more efficiently.
“The temptation is to think that it’s harder for boutiques to respond, with fewer sales and marketing professionals, but I’ve found it more efficient because there is real focus. The smaller teams are very dynamic, and they are not weighed down by packed schedules of standard reporting and planned content with no room to divert resources quickly.
“While it’s true that we do not have a large team of writers to turn to, we focus instead on thought-provoking, quality output.”
