The investment management industry, which oversees trillions in assets, is under increasing pressure from shrinking margins, rising costs, and growing operational complexity. In the first episode of this four-part series, experts from Marex and Coalition Greenwich explore how trading desks—vital to executing investment strategies—are being challenged to achieve more with fewer resources. As firms expand into new geographies and asset classes, desks are being forced to rethink their operating models and adapt to a more demanding and dynamic environment.
Interview
VOICE OVER – The investment management industry is responsible for looking after many trillions of assets under management, supporting pensions, insurers, mutual funds and private wealth, yet it faces growing pressure to lower margins and cut costs. According to research by the Kahn group, 65% of asset management executives expect margin pressure to increase in the next two years. Fee compression is hitting the profit margins of 50% of traditional investment firms, while 37% of alternative asset managers are being hit by rising wage bills and 49% higher interest rates as pressure builds across the industry, trading desks are being asked to do more with less.
Jack Seibald, Marex – Traders are responsible for the implementation of the investable strategies, and that’s become very much more complicated in a market that’s changed considerably over time,
Jesse Forster, Coalition Greenwich – Everybody is doing more with less. And the buy side is forced to scale as they expand into additional geographies and asset classes.
VOICE OVER – Behind every investment strategy is a trading desk turning ideas into action. They buy and sell assets at the right size, price and time, manage trading costs and support alpha returns on assets for investors. But as firms expand across geographies, time zones and asset classes, the strain is becoming increasingly clear.
Massimo Labella, Marex – Some of the firms, they already have an internal dealing desk, but need to reach into a new part of the world, a new asset class. Establishing a physical presence in any of the major cities across the world is very expensive.
John Orrock, Marex – Some of them may have a geographical disadvantage where they’re based in Hong Kong, for example, and don’t want to be up all night dealing in emerging market, LATAM bonds as an example. Others may not have the expertise; they may have a dealing desk that specializes in equities and have less frequent fixed income trades that they need help with, and obviously, vice versa.
VOICE OVER – Trading desks are under pressure not just to execute but to stay continuously aligned and connected with portfolio managers, counterparties and markets, all while maintaining the right infrastructure and access. It’s no surprise they’ve become one of the most resource-intensive parts of the investment process.
Bobby Crosswell, Marex – Just going through each specific broker and getting papered on a one-by-one basis, which can be, frankly, just time-consuming.
John Orrock, Marex – Maintaining all those relationships, having to have AML and KYC every year with all those relationships, is quite a challenge. Also, keeping up with technology and making sure that you have the right tools is also key.
VOICE OVER – Yet in many firms, those resources are stretched, budgets are tight, the expectations keep rising. And it’s not just about headcount, it’s about capacity, coverage, and resilience.
Bobby Crosswell, Marex – Look at all the other costs involved if you’re going to have an internal trader, whether that’s salary, bonus time, sick days, Bloomberg healthcare, the list goes on
Massimo Labella, Marex – The smaller the firm, typically means that the desk has to cover more, and that could be everything from order inception through to post-trade settlement.
John Orrock, Marex – It may even be that someone needs holiday cover and that for five weeks of the year they haven’t got anybody who sat on the desk
VOICE OVER – Across the industry, firms are rethinking how their desks are structured. How to stay connected, deliver value, and scale without adding cost. The challenges are real, but so are the alternatives. In the next three episodes, we’ll explore how forward-thinking firms are evolving their trading desks, and what that means for scale, speed, and staying competitive because the markets have changed. The question is, has your desk?
Jack Seibald, Marex – Heads of trading desks need to consider whether they can build and maintain the infrastructure required to perform that function efficiently and effectively for their firms within the context of the current environment, or whether they can find another solution to get them to that same answer.
