When it comes to creating alpha, fixed-income managers that stay ahead of rapidly evolving technology will have an advantage over those that remain stuck in the analog world. But how do you assess how well your manager is navigating the changing technological landscape?
It’s critical to know how advanced your manager is, because technology has a direct and increasingly important effect on performance. Managers that have the right tools will do a better job of identifying and capturing opportunities, even in illiquid or volatile markets. And they’ll have more time to focus on the strategic and analytical work that humans are better wired for.
That’s why you’ll want to know where your manager falls on the digital continuum. The following checklist of questions will help you gauge whether your manager has the right technological tools and innovative attitude to succeed in the fixed-income world of the future.
In the last five years, how, specifically, has technology changed the way you do business? What changes are you contemplating for the next five years?
Your asset manager should be able to provide specific examples of how they have improved client outcomes using technology they built or bought. They should also have an explicit technology strategy that anticipates new developments in artificial intelligence, machine learning and fixed-income market conditions.
Can you describe your organization’s culture and attitude toward technology?
An organization that truly values technology should have a track record of integrating it into the investment process, as well as a bottom-up approach to innovation in which the people who encounter everyday problems and inefficiencies are empowered to suggest new technological solutions. Senior management should view fixed-income technology as a top priority.
What problems are your most compelling technology tools solving? What problems do you think technology can solve in the future?
Technology should be used to gain an edge in the marketplace, not just to improve the bottom line. That is, the end goal of integrating technology into the investment process should not be a headcount reduction. Make sure your manager is focused on how technology can help them solve the real-world problems that impede the best client outcomes. If they can’t articulate their current problems or solutions, their strategy may be geared more toward helping themselves than you.