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Cloud computing is transforming investment management

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Cloud computing is transforming investment management

Some best practices for investment firms to follow in adapting cloud technologies

By Tom Cole, Managing Director – Europe, Abacus Group

The paradigm shift towards cloud computing in the investment management business is exciting. Bleeding edge technologies are accessible to businesses and individuals, at relatively affordable price points. Cool-looking newcomers are frequently entering the market, offering a promise to drive efficiencies and productivity to businesses.

Don’t be fooled. This thriving marketplace with its creatively marketed products and a perceived ease of consumption can be a risky concoction. Managers must be shrewd at selecting cloud solutions, carefully weighing all of the costs and benefits.

If you are a business or technology manager at an investment management firm considering a move into public cloud IT, here are some considerations:

Try before you buy. Cloud services regularly boast benefits such as rapid deployment, self-service, pay as you go and others. Take advantage of this by signing up for free trials (where possible) and advance proof of concepts to wider audiences, absorbing feedback and tracking with key performance indicators (KPIs). Needless to say, approach with caution and be mindful of company policies and procedures for such trials.

Create and evolve KPIs. The term “benefit” is broad. Some benefits can be measured quantitatively, some qualitatively. To instill some structure and add consistency during the selection and evaluation process, KPIs should be firmly considered. It is rare that projects have a clear and straight road — so be nimble, accepting that a KPI may no longer be appropriate. Even better, uncover new KPIs as you evaluate.

Separate reality from marketing myth. A popular misconception about the public cloud is that it is a do-it-yourself proposition. The reality is you need IT expertise and a strong service layer to implement a cloud application and get the most out of it. There are a lot of promotional materials – including “explainer videos” – that make it sound easier than it is. A public cloud service may look simple, but when an investment management firm considers how it should be deployed – including layers of security, regulatory compliance, customer access, ongoing governance to name a few – it suddenly becomes quite complex.

Get buy-in from your key partners and managers. Like with any new IT application, make sure that key people in the organization not only buy-in to the idea, but that they understand how to use it properly. Technology is only as powerful as the consumers engagement and use. Your KPI’s will again be useful here to continually evaluate use and engagement i.e. is the solution being consumed in the real world as intended. Auditabilty is generally the norm for most solutions, such data points should be relatively straight forward to obtain and continually report with.

Take a holistic view. Standards differ from technology to technology; manufacturer to manufacturer; service provider to service provider. Yet there are many workflows and inter-dependencies between different systems. You need to look holistically to see if you can leverage existing technologies in your new cloud environment, and how using existing tools may impact the firm. Furthermore there maybe existing solutions already in place serving a purpose which can eradicate or dilute the requirement for another solution.

Understand the total cost of ownership. On the surface, a cloud product or service may seem to have a set cost. The challenge is understanding what the true cost is, looking at the time and energy you invest, not just for implementation but for maintenance, upgrades and additional security. There will always be underlying costs. Consider this: you buy a public cloud service that allots one terabyte of data per user in your mobile workforce. For staff to fully enjoy vast pools of data are their endpoints capable? Do these need to be upgraded imposing further cost?

Consider managed cloud services. In order achieve full control of your cloud technology, a managed services provider may be your best solution. A competent partner should help you piece together all of the moving parts in your cloud application – with a state-of-the art level of cybersecurity on top. An experienced cloud services partner also brings know-how gained from multiple business relationships to help you understand where everything fits into what you already have. And you won’t have to reinvent the wheel.

How accessible is your provider? With some public cloud environments, you may have limited access to support personnel. Technology does have wobbles and depending on your business, you may need rapid response to resolve. When opting for cloud services you have to accept that your level of transparency and control lessens. You need to ensure that appropriate service level agreements are in place. If these cannot be achieved via the larger cloud providers then the service provider intermediary is a solid consideration, whereby you can enjoy their service level agreements and relationships (at larger scale).

Security, security, security. The age-old saying that you can outsource responsibility but not accountability is even more prevelant with cloud adoption. Cloud providers often boast many information security certifications. Often the cloud provider is the foundation to which your solution is being built on. At time all the hard work and controls imposed by cloud providers can easily be unwound by a misconfigured solution. It is very important that you allocate correctly skilled resources or service providers to ensure the high levels of protection continue on past the cloud platforms offering into your business solution. The operational due diligence microscope is becoming more focused on what both technical and operational controls you impose as a business the compliment cloud providers robust offerings.

Participate in industry groups and forums. To stay up-to-date on the latest benefits as well as risks in cloud computing, it’s a good idea to get involved in user groups and industry events. The Cloud Industry Forum in the UK offers good guidance and advice. Furthermore within the alternative asset manager space AITEC and AIMA are popular consortiums offering frequent and sound advice as to how to tackle such business and technology challenges.

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Not company earnings, not data but vaccines now steering investor sentiment

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Not company earnings, not data but vaccines now steering investor sentiment 1

By Marc Jones and Dhara Ranasinghe

LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.

Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.

Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.

“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.

“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”

The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.

Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.

But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.

(Graphic: Vaccinations per 100 people by country, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolalapd/Pasted%20image%201611247476583.png)

SHOT IN THE ARM

Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.

Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.

Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.

“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.

The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.

Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.

“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”

The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.

Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.

Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.

Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.

“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”

(GRAPHIC: Renewed surge in COVID-19 across Europe – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbejqwpq/COVID2101.PNG)

(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)

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BlackRock to add bitcoin as eligible investment to two funds

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BlackRock to add bitcoin as eligible investment to two funds 2

By David Randall

(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.

The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.

The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.

A BlackRock representative declined to comment beyond the filings when contacted by Reuters.

Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.

Bitcoin tumbled 10.6% in midday U.S. trading Thursday.

Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.

“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”

There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.

BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)

(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)

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Bitcoin slumps 10% as pullback from record continues

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Bitcoin slumps 10% as pullback from record continues 3

LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.

The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.

Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.

(Reporting by Julien Ponthus; editing by Tom Wilson)

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