By Chris Grandi, CEO at Abacus Group
Ten years ago the concept of cloud computing was being talked about more than it was actually being deployed.
The global investment management market had been trained for years to prioritize ownership of its IT assets. This, we felt, was the right time to start our managed cloud services company, Abacus Group LLC.
The common solution then was to procure your own equipment, hire your own staff and manage your IT stack directly out of your physical office. In accordance with industry standards, this was the only way to truly protect your data, and guarantee you will have persistent connectivity to the markets and other third parties. The idea of outsourcing all of your infrastructure, data management and services to a third-party cloud provider ran against the commonality of control that investment managers were used to. Time does change perspective and technology changes quickly — almost always for the better.
Today these same managers are outsourcing their e-mail messaging to Microsoft’s cloud. They are quickly turning up and turning down servers in the Amazon and Google clouds. They are also leaning heavily on “private cloud” providers to tie these services together and manage the last mile to their fund’s employees, who need to be able to work from anywhere. The equipment has been moved out of the office, IT staffs have been trimmed, and their desire to move IT spending from a capital expense to an operational expense has been realized.
How did an industry that trusted no one with their data, evolve into a place where their data is now everywhere, and being managed by engineers they have never met? As we see it, there were a few main drivers: Cost, Flexibility, Security, Utility and Psychology.
Like any business manager, investment managers have year-end P&L statements which dictate the profitability of their business and how they are able to compensate their teams. The traditional method of outlaying large capital expenditures to procure IT hardware was very expensive. Further, in accordance with IT best practices, this would have to be done every three years. Often times these lumpy expense years seemed to coincide with a year of sub-optimal performance. The cloud-based model eliminated these cap ex expenditures and moved IT expense to a predictable monthly or quarterly operational expense. The cloud model also provided fund managers with new flexibility to expand their IT footprint as they grew, or reduce during downsizing. The flexibility allowed managers to only pay for what they needed.
But what about the cloud’s 500-pound gorilla — security? The previous perception was that in order to protect your data you needed to own and control your equipment and know the person who manages it. The market has now come to understand that cloud providers are able to deploy effective large-scale, enterprise cyber security solutions to their clients. These solutions, if deployed on their own, would cost fund managers millions of dollars. Cloud providers have the benefit of utilizing their economic scale across their client base to provide better cyber solutions than the funds could provide themselves. Further, fund managers are now aware that their biggest cyber risk resides with their employees and in the office, not with their technology solutions. The concept of protecting your data by keeping your servers in the office has been turned around. Unless you have 24-hour security managing your on-site communications room, and bio-metric protections to access where the servers sit in your office, you are not protected.
Cloud services are providing managers with many new products and services not possible 10 years ago. Investment managers are now using more data-sets and applications in their research process to support investment decisions. Artificial Intelligence and Big Data tools have moved from buzzwords to utilized and productive data points. Most of these tools have been developed over the past five years, and almost all of them were built and deployed in public clouds. As managers look to use more of these tools, they now have to accept that the only way to do this is through a public cloud such as Amazon, Microsoft or Google. We have seen many instances where the utilization of these tools has quickly convinced fund managers of the effectiveness, speed and reliability that public and private clouds can bring to their businesses. This comfort level will quickly open their perspective to outsourcing other parts of their infrastructure, or all of it to, to a third-party cloud provider.
Geoffrey Moore published his book, “Crossing the Chasm,” more than 25 years ago. His evaluation of why certain technologies gain mass consumer acceptance, while others die on a vine had to do with a number of factors, a couple of which were psychology and timing. He pointed out the many hand-held computing products which did not make it (remember the Palm Pilot?). The ones that failed were not inferior to the ones that did succeed. The principal difference was that the successful products were launched at a time when the market was ready for them. It is hard to believe how we ever lived without our iPhones and Androids.
Similarly, there has always been a herd mentality in the investment management space. I have always attributed this to the nature of this business, in that great managers know how to manage risk. Moving everything to the cloud ten years ago, would have been risky. Managers do not seek to obtain first mover advantage when it comes to operations management. The mentality has always been to let others try it first, and then allow more funds to work out the issues and improve the experience. Once new operational technologies are proved out, have demonstrable benefits in service, function and cost, and lastly have become the norm, then it is time to change.
Investment managers do not want to be the first to deploy innovative services, but they also do not want to be the last. We have crossed the chasm with cloud computing, and there is no going back.
Oil slips after U.S. crude stocks rise amid deep freeze hit to refiners
By Sonali Paul
MELBOURNE (Reuters) – Oil prices fell in early trade on Wednesday after industry data showed U.S. crude inventories unexpectedly rose last week as a deep freeze in the southern states curbed demand from refineries that were forced to shut.
Crude stockpiles rose by 1 million barrels in the week to Feb. 19, the American Petroleum Institute (API) reported on Tuesday, against estimates for a draw of 5.2 million barrels in a Reuters poll.
API data showed refinery crude runs fell by 2.2 million bpd.
U.S. West Texas Intermediate (WTI) crude futures were down 55 cents or 0.9% at $61.12 a barrel at 0136 GMT, after slipping 3 cents on Tuesday.
Brent crude futures fell 38 cents, or 0.6%, to $64.99 a barrel, erasing Tuesday’s 13 cents gain.
Investors will be awaiting confirmation from the U.S. Energy Information Administration later on Wednesday that crude inventories rose last week, despite the hit to shale oil production amid the unprecedented icy spell in the U.S. south.
“The key question is how quickly does U.S. oil supply recover. It looks like supply will recover faster than refineries, and supply is going to outpace demand in the next few weeks. That will give negative weight to the market,” Commonwealth Bank analyst Vivek Dhar said.
The price retreat is being seen as a pause following a rally of more than 26% to 13-month highs in both Brent and WTI since the start of the year.
Prices have jumped due to the U.S. supply disruption and supply discipline by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, led by an extra 1 million bpd cut by Saudi Arabia.
At the same time stimulus spending to boost growth, investors rotating into commodities, and hopes that the rollout of vaccinations could lead to an easing of pandemic restrictions are all buoying oil prices.
(Reporting by Sonali Paul; Editing by Edwina Gibbs)
Oil settles mixed amid post-storm uncertainty
By Laura Sanicola
NEW YORK (Reuters) – Oil prices settled near year-long highs on Tuesday on signs that global coronavirus restrictions were being eased, although concerns about the pace of a U.S. economic recovery and the return of Texas oil production kept gains in check.
U.S. crude settled down 3 cents to $61.67 a barrel, still close to its highest levels since January 2020. Brent crude <LCOc1> settled up 13 cents, or 0.2%, to $65.37 a barrel.
Both contracts rose more than $1 earlier before retreating.
Shale oil producers and refiners in the southern United States are slowly resuming production after 2 million barrels per day (bpd) of crude output and nearly 20% of U.S. refining capacity shut down because of last week’s winter storm.
Traffic at the Houston ship channel was slowly returning to normal. Production, however, was not expected to fully restart soon and some shale producers forecast lower oil output in the first quarter.
Some oil production may never come back, commodities merchant Trafigura said on Tuesday.
After the cold snap, U.S. crude oil stockpiles were also seen falling for a fifth straight week, while the inventories of refined products also declined last week, an extended Reuters poll showed.
“It appears that last week’s severe cold spell and related Texas power outage could be affecting the weekly EIA data into the middle of next month,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
There were also concerns over the U.S. economic recovery, which the chair of the Federal Reserve, Jerome Powell, said remained “uneven and far from complete.”
He said it would be “some time” before the central bank considered changing policies it had adopted to help the country back to full employment.
Commerzbank analyst Eugen Weinberg said the recent oil price rise was buoyed by upbeat price forecasts from U.S. brokers.
Goldman Sachs expects Brent prices to reach $70 per barrel in the second quarter from the $60 it predicted previously, and $75 in the third quarter from $65 forecast earlier.
Morgan Stanley, which expects Brent to reach $70 in the third quarter, said new COVID-19 cases were falling while “mobility statistics are bottoming out and are starting to improve”.
Bank of America said Brent prices could temporarily spike to $70 in the second quarter.
(Reporting by Laura Sanicola in New York; Additional reporting by Bozorgmehr Sharafedin in London and Jessica Jaganathan in Singapore; Editing by Matthew Lewis and Mark Heinrich)
Exclusive: AstraZeneca to miss second-quarter EU vaccine supply target by half – EU official
By Francesco Guarascio
BRUSSELS (Reuters) – AstraZeneca expects to deliver less than half the COVID-19 vaccines it was contracted to supply the European Union in the second quarter, an EU official told Reuters on Tuesday.
The expected shortfall, which has not previously been reported, comes after a big reduction in supplies in the first quarter and could hit the EU’s ability to meet its target of vaccinating 70% of adults by the summer.
The EU official, who is directly involved in talks with the Anglo-Swedish drugmaker, said the company had told the bloc during internal meetings that it “would deliver less than 90 million doses in the second quarter”.
AstraZeneca’s contract with the EU, which was leaked last week, showed the company had committed to delivering 180 million doses to the 27-nation bloc in the second quarter.
“Because we are working incredibly hard to increase the productivity of our EU supply chain, and doing everything possible to make use of our global supply chain, we are hopeful that we will be able to bring our deliveries closer in line with the advance purchase agreement,” a spokesman for AstraZeneca said, declining to comment on specific figures.
A spokesman for the European Commission, which coordinates talks with vaccine manufacturers, said it could not comment on the discussions as they were confidential.
He said the EU should have more than enough shots to hit its vaccination targets if the expected and agreed deliveries from other suppliers are met, regardless of the situation with AstraZeneca.
The EU official, who spoke to Reuters on condition of anonymity, confirmed that AstraZeneca planned to deliver about 40 million doses in the first quarter, again less than half the 90 million shots it was supposed to supply.
AstraZeneca warned the EU in January that it would fall short of its first-quarter commitments due to production issues. It was also due to deliver 30 million doses in the last quarter of 2020 but did not supply any shots last year as its vaccine had yet to be approved by the EU.
All told, AstraZeneca’s total supply to the EU could be about 130 million doses by the end of June, well below the 300 million it committed to deliver to the bloc by then.
The EU has also faced delays in deliveries of the vaccine developed by Pfizer and BioNTech as well as Moderna’s shot. So far they are the only vaccines approved for use by the EU’s drug regulator.
AstraZeneca’s vaccine was authorised in late January and some EU member states such as Hungary are also using COVID-19 shots developed in China and Russia.
OUTPUT BOOST DOWN THE LINE?
While drugmakers developed COVID-19 vaccines at breakneck speed, many have struggled with manufacturing delays due to complex production processes, limited facilities and bottlenecks in the supply of vaccine ingredients.
According to a German health ministry document dated Feb. 22, AstraZeneca is forecast to make up all of the shortfalls in deliveries by the end of September.
The document seen by Reuters shows Germany expects to receive 34 million doses in the third quarter, taking its total to 56 million shots, which is in line with its full share of the 300 million doses AstraZeneca is due to supply to the EU.
The German health ministry was not immediately available for a comment.
If AstraZeneca does ramp up its output in the third quarter, that could help the EU meet its vaccination target, though the EU official said the bloc’s negotiators were wary because the company had not clarified where the extra doses would come from.”Closing the gap in supplies in the third quarter might be unrealistic,” the official said, adding that figures on deliveries had been changed by the company many times.
The EU contracts stipulates that AstraZeneca will commit to its “best reasonable efforts” to deliver by a set timetable.
“We are continuously revising our delivery schedule and informing the European Commission on a weekly basis of our plans to bring more vaccines to Europe,” the AstraZeneca spokesman said.
Under the EU contract leaked last week, AstraZeneca committed to producing vaccines for the bloc at two plants in the United Kingdom, one in Belgium and one in the Netherlands.
However, the company is not currently exporting vaccines made in the United Kingdom, in line with its separate contract with the British government, EU officials said.
AstraZeneca also has vaccine plants in other sites around the world and it has told the EU it could provide more doses from its global supply chain, including from India and the United States, an EU official told Reuters last week.
Earlier this month, AstraZeneca said it expected to make more than 200 million doses per month globally by April, double February’s level, as it works to expand global capacity and productivity.
(Reporting by Francesco Guarascio @fraguarascio; Additional reporting by Andreas Rinke and Sabine Siebold; Editing by David Clarke)
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