How the Covid-19 pandemic is changing the way the buy-side front office works

The coronavirus pandemic has fundamentally changed the way the investment management front office operates. In the weeks, months, and years ahead, investment teams will have to rethink business continuity plans, redefine the workplace environment, and expand investment in technology and process automation across the enterprise.

Much of that work has already begun, and nowhere will the changes be more prominent than in the buy-side front office. Many of the largest hurdles the industry has had to overcome while working through disruption have centered around maintaining productivity and, more importantly, collaboration across front-office investment teams.

If fact, in a poll taken during a recent event with investment management professionals to discuss this topic, 58 percent of attendees said front-office teams within their organization had the most difficulty transitioning to a work-from-home environment. Nearly 30 percent of attendees listed back-office team, while only 12 per cent said middle-office teams had the most difficulty shifting to remote working.

The impact of the coronavirus pandemic on the investment management industry manifested predominantly in the buy-side front office, predictably so, as so many business practices within the buy-side have been overly reliant on in-person contact and lacked thorough, realistic and sustainable BCP strategies.

It’s not terribly surprising that the front office bore the brunt of challenges during the initial weeks and months of the pandemic. For decades, front-office teams have been reliant on the “over-the-shoulder” approach to collaboration that included quick conversations by the water cooler, spontaneous 15-minute sit-downs in the conference room or quick discussions in the open office setting. That all disappeared in March and was replaced with social-distancing and work-from-home measures.

There is one super-trend in the way technology is delivered that stood out as a difference-maker this year when compared to previous disruptive events, like Hurricane Sandy in the U.S. in 2012. That’s the use of cloud and SaaS-based software. For organizations and teams that used cloud-based technologies, the transition to work-from-home was far less disruptive.

Consider our user base at Mackey, which is formed of front-office investment teams for actively managed portfolios. During the initial weeks of lockdown, we saw our usage rates among clients stay relatively consistent, indicating a seamless switch from office to home. That trend has held as work-from-home measures have continued through the second and third quarters.

There were, however, two specific behavioral changes we observed among our clients in the weeks and months following the shutdown. There was a significantly higher percentage of primary research content being authored within our SaaS-based research management platform, and, more notably, there was as much as a 50 percent spike in our mobile applications for iPhone, iPad, and Android devices.

So, given what we already know, what will the long-term implications of the disruptive events of 2020 be on the buy-side front office? It is important to recognize that no one knows exactly what will happen post-COVID-19, but from the insights available to us now here are a few things we can predict:

1.Redefining workplace environments

It is difficult to imagine a return to densely packed open-air offices as we emerge from the pandemic. Regulations around health and safety will be tightened and anxiety for many employees returning to the workplace will be heightened. Firms have already begun rethinking the workplace environment, and enterprise operating models will need to adjust. It is also worth mentioning that while many organizations will be able to facilitate remote working for an extended period, front-office professionals may still view it as a novel concept in the short term.

‍2.Accelerated move to the cloud

Front-office investment teams that have already begun using cloud technology were able to make a smoother transition to working from home. Teams that relied on VPN access and newly configured hardware to access corporate networks had to overcome bigger logistical hurdles. The lessons learned from this event will drive higher adoption of cloud and SaaS-based technologies moving forward.

3.Increased calls for workflow transparency and data security

As discussed in our recent webinar, the growth of cloud technology and remote working models will drive calls for greater transparency and data security from investors and regulators alike. There will be an emphasis on protecting personal information and minimizing data loss. There will also be a heightened demand to maintain workflow transparency and centralized auditing capability for investment team workflows, which will be increasingly decentralized across geographies.

4.Reengineering business continuity plans

Investment organizations are going to have to recreate their business continuity plans (BCP). The most noteworthy challenge organizations faced when this crisis hit is that many BCPs relied on failover to other geographies as the default for managing through disruptive events. That approach was not going to be successful in a global pandemic. Moving forward BCPs will focus less on geographies for housing technology during disruption and more on more on technology that can support a mobile, work-from-anywhere workforce.

The full extent of the pandemic’s impact on the buy-side front office is still unknown.  Based on what we’ve seen over the past few months, however, it is already clear that we are seeing significant changes to the types of technologies that support investment teams. Not surprisingly, the emphasis is on the adoption of new technology and business processes that support a work-from-anywhere approach without compromising team collaboration and information security. Ultimately we think these changes — redefining the workplace environment, the acceleration of cloud adoption, demands for heightened information transparency and security, and redefining what business continuity means — will lead to a more efficient, reliable and productive operating model to the asset management front office.