Facing Up to the Next Normal

What does the next normal look like for investment managers contending with shifting workforce dynamics, a deluge of data, and demands to unify information?

As hedge funds grapple with myriad challenges in their business and across our industry, we see several key trends. Rising costs and the need to embrace data and new technology remain an ongoing focus. In addition, many funds are overseeing a changing workforce and post-pandemic re-evaluation of office real estate and geographic locations.

For firms evaluating their next normal, a thoughtful model that embraces new uses of technology, unifies data, and refocuses staff on higher-value activities is critical. A modernized platform will enable firms to maintain greater control over the entire investment lifecycle across private and public investments. Intelligently leveraging technology, optimizing teams’ expertise, and nimbly taking on whatever comes next will be vital to achieving business objectives.

Transforming Operations, Data, and Technology

An effective strategy to quickly move into new opportunities and asset classes and ensure accuracy at scale is already essential. Managers must now also apply a data-first lens to everything they do.

Cumbersome legacy technology and heavily customized in-house systems are holding back many firms. As a result, teams spend valuable time tailoring processes and responding to reporting demands. Not only does this tech sprawl create a drag on an organization’s agility, it also leads to disconnected data environments.

In today’s market, many hedge funds want to reduce complexity and maintenance across multiple vendors and in-house legacy systems so that both investment and non-investment teams can focus on their core responsibilities.

Furthermore, business transformation will also be fundamental during difficult economic times. Modern systems give firms the agility to quickly pivot to new strategies and take advantage of growth opportunities.

A data-first approach can enable firms to streamline technology and use the data across their systems in strategic decision-making. By extracting value from data, firms are in a stronger position to trade faster, create more efficient operational processes, and deliver richer information to investors.

Fighting for Tech Talent

In an environment where technology and data are a competitive advantage, the cost of tech talent has climbed sharply, especially in core financial centers such as London, Hong Kong, Singapore, Chicago, Boston, San Francisco, and New York. Whether locally or in new locations, managers want to get teams trading quickly and scale business through new trading strategies without losing investment opportunities or operational efficiency.

The need for tech professionals has widened as firms increasingly adopt a data-driven mindset. Certain roles, such as data scientists and software developers, have become particularly challenging to hire since businesses across multiple industries compete in the same talent pool. Data stewards who champion strong governance and data management within their business units have also grown in importance as firms further lean into their data-driven strategies.

Shifting workforce dynamics have only magnified hiring and retention challenges – firms stipulating in-office work experience even greater headwinds. Hedge fund managers view their company’s culture as a defining feature that drives collaboration and innovation. As a result, many require their workforce to come into an office.

Yet, managers are at a crossroads. In November 2022, Women in Banking & Finance and the London School of Business released a report with interviews of 100 professionals working at institutions such as Goldman Sachs, J.P. Morgan, and Barclays. In the researcher’s exploration on the future of work, 95 percent of survey participants stated they prefer a hybrid work model over returning to the office full-time.¹

Before the COVID-19 pandemic, most hedge funds had their investment and non-investment teams under one roof. To stay competitive in the next normal, they must rethink traditional models.

For years, it was standard for hedge fund PMs to sit next to traders and for traders to be close to operations. That hasn’t been the case for most funds over the past two years, yet many have posted better-than-expected performance.

Hedge fund managers are coming to terms with the idea that large teams of tech and operations staff sitting in expensive global locations next to the front office are no longer a valuable deployment of capital. As a result, they’re seeking to re-size teams to focus more on front-office technology and automate operational functions wherever possible.

Working with a Trusted Partner

While much has changed in the past few years, investment managers remain unwavering in their ambitions to generate alpha and produce strong absolute returns. How they achieve that goal, though, looks a lot different.

Rethinking operating models now and into the next decade is a solid start. That means replacing legacy systems and manual processes. It also means unifying disparate data and eliminating disjointed processes and systems. To be a data leader, firms must embrace a data-first mindset by enabling access to clean and reliable data.

To succeed in the next normal, firms will also need support from the right talent. For some, that may be in-house staff in key roles. For others, that may mean support from a trusted partner.

By continually evaluating their model, firms will be in a stronger position to excel in a highly competitive market. After all, continually evolving is what sets a business apart. It’s also what makes our industry so dynamic.

Authors:
Chris Barrow, Head of Business Development for Europe, Arcesium
James Horridge, Vice President of Sales Engineering for Europe, Arcesium

¹ 100 DIVERSE VOICES: A Framework for the Future of Work in Financial and Professional Services, Women in Banking & Finance; November 2022

Back to Insights