The Alpha Generator Scribe

We were recently joined by 14 fixed income buy side heads of desk for a breakfast meeting at the Tower of London to share advice on how to showcase the value-add of a trading desk. The session was put together on the back of questions that our members have been asking on the topic over the past months – “How can you present this internally to stakeholders who view the trading desk as a cost centre?”, as well as “How can you measure and reward trading teams based on true, value-add alpha generation metrics?”
Our members discussed how traders should be expected to add value to the alpha generation process, measuring this through qualitative and quantitative metrics, the role technology should play, and the proactive steps a trading head should take to showcase the value of a desk to internal stakeholders. 

We’ve visually captured the key insights and takeaways of the discussions below in the form of a scribe..

Here’s some advice from our buy side members:

Adapting legacy tech for faster scale & innovation

  • All buy side are facing the same issues, primarily that there is a lack of resources to invest in fully modernising systems. There needs to be a shift in the perception of the desk, away from being seen as a cost centre, to a generator of alpha to support investment from the wider business.
  • Traders should also look to involve IT teams in discussions about what is and isn’t possible within the confines of existing systems. There may be under-utilised capacity that you are unaware of. Often making small, simple changes can lead to greater efficiencies, and help to drive internal acceptance of greater changes down the line.
  • It has always been hard for technology companies to serve the buy side in a bespoke way, and in many cases technology is designed for one specific asset class.
  • Main challenges of replacing legacy technology with new systems is down to cost, so an alternative to this is coding on your legacy infrastructure as a cheaper alternative to tailor your legacy systems.
  • The buy side want to see technology providers working as a partner to the business. You can get a lot of easy wins (small tech changes that can improve the way you trade), but it is crucial that you can showcase the tangible benefits to the decision makers.

We’ll be continuing this discussion in October during our Fixed Income Boston Members In-Person Meeting: