The sell-side has been going through a relatively rough few years, with changes to unbundling and commission spend, with increasing regulatory burden and they have been in a long cost cutting cycle. They have had to cut back on their number of desks and research teams. They are focusing more on electronic desks, and asset classes that generate higher revenues. However, from the buy-side perspective, we’re generally still seeing firms looking to increase global operations away from their original hubs. Firms are looking to increase their global presence to take advantage of markets that are increasingly open, and to get teams on the ground to manage those funds.
Asia is a strong market that continues to grow, and so with those two elements that are happening at the same time; where on one side you’re still seeing contraction and rationalisation, and on the buy-side there is room for expansion, we wanted to take advantage of this shift, and we chose to open an office in Hong Kong at this time.
Trading follows where investment wants to go, so while we have a centralised dealing desk in London, and that’s been where most of the investment has been done, our move to having a second investment based hub in Hong Kong is part of our view that Asia is becoming increasingly important. This is a region where we’ve always had some exposure but we’ve decided to expand and have an operation out here, an investment team and the trading that is associated with that. We’re going through that process at the moment.
A long term plan
There’s been a number of changes in our organisation over the last three years with regard to the asset management business. We’ve been putting in a lot of effort into what we want to do as a business. And the Asian part of that journey is quite significant because it’s the first time we’re going overseas. But it is important to say that it is not being driven by more recent developments such as the stock connect, etc. It’s a commitment to the region because of what we see happening over the next decade or so.
If I talk about me personally rather than the business, part of the reason why I think this is an interesting time do something somewhere new and innovative is because we are in a scenario where stock markets are undervalued. The combination of market factors and outlook, and the structural reforms such as Stock Connect, etc. is going to be positive for the markets. So for me, it’s a very interesting time to be in a place where I do have flexibility and room for innovative to take advantage of those circumstances. However, for the organisation I think the commitment to Asia has been something that’s being building up over the last couple of years as part of what we’re trying to do as a business as a whole.
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