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Finding Operational Alpha

In last week’s post we discussed the importance of modernizing workflows and the related opportunity to generate Investment Alpha for the buyside. And while Investment Alpha remains the cornerstone of our focus at the AIR Summit, we think it’s valuable to recognize and examine other sources as well. At AIR Summit 5.0 we introduced the concept of Organizational Alpha, with a focus on modernizing approaches to recruiting and talent management, highlighted by a very engaging keynote by Rasheed Sabar entitled “Talent as an Asset Class: Alpha via Quantitative People-Selection”.

An area we have been spending increased efforts researching recently is Operational Alpha. We think of Operational Alpha as the opportunity for improving areas such as transaction processing, compliance, communications etc so as to reduce friction in workflows. This provides two significant paths to adding alpha – improved operating margins in the investment process and the freeing up of resources to focus on higher value activities [eg: portfolio construction and implementation]. Examples of the implementation of Operational Alpha platforms include early examples such as the FIX protocol with its focus on trading, and more recently Symphony [AIR 3.0] and Behavox [AIR 4.0] in the areas of Communications and Compliance, respectively. Notably, this opportunity extends across the buyside and the sellside and everywhere in between.

MiFID II, Covid-19 as Catalysts

Regulatory initiatives have a rich history of introducing increased costs for the industry, as well as the resulting imperative to introduce technology in order to face that challenge while successfully complying.

For example, reduced profitability due to MiFID II has forced the sellside to reduce headcount and services in areas such as Research and Corporate Access. While the buyside is forced to contend with the increased cost and complexity of tracking and its consumption of such services.

Covid-19, meanwhile, has forced all market participants to virtualize their workflows and processes over an incredibly compressed timeframe. Typically, the implementation, integration and utilization of new technology is measured in years, not months. Yet for most firms the transition has been smooth, due in some part to the fact that the use of cloud-based platforms such as Zoom and Slack were largely underway.

Anecdotally we hear that the move towards “virtual” and “on-demand”, at least when it comes to the consumption of certain services [eg: research, events etc], introduces certain time and cost saving efficiencies and will have some lasting level of persistence.

Extracting Operational Alpha by Digitizing Workflows

WeConvene, an AIR AlphaTech Member and presenting company at AIR 5.0, is taking an interesting platform-as-service approach to digitizing Corporate Access, Capital Markets, IR and Research workflows. The SaaS platform combines functions typically found across these processes – phone, email, calendar, travel etc –that streamlines the entire end-to-end experience. Integration with common tools, such as Outlook, Bloomberg and Zoom means no rip and replace implementation.

The typical application is the organization and management of events like deal road shows, analyst marketing, C-suite access and conference calls. The platform provides tools to specific users to manage their respective components of a given process, and for the organization to track progress in real time. The result is simple and intuitive coordination and consolidated views across origination, sales, corporate access, etc within sellside firms, allowing management to identify higher value interactions and produce better content at the right rhythm. For the buyside WeConvene provides self-serve access and time management efficiency improvements. Similar use case applications exist in IR for Corporates. In short, digital efficiency for all parties and users.

Unified User Experience

While integration into current workflows and technology tools is obviously important and critical to uptake of the platform, another thing I particularly like is WeConvene’s user experience approach. As a buyside user, self-serve booking into certain events or meetings is intuitive in all other aspects of our daily lives such as dining or travel. On the sellside, managing aspects of an interaction across marketing, communication, registration etc complete with data and analytics in one intuitive platform is a much more efficient approach than tracking items such as multiple calendars, email chains and content.

And as we continue to learn in managing the AIR Summit, combining all of those features with analytics and CRM like functionality adds tremendous value when it comes to the intricacies of managing engagement between clients and colleagues.

Impact of Digitization

According to WeConvene their enterprise clients held over 1500 events on the platform last year, with 2020 on track to be up some 30% YOY. Notably given the current quarantine environment, virtual bookings are up nearly 290% YOY, while in-person bookings are down 60% YOY. I think about environments such as the one we’re in currently as having components of both temporary and permanent impact, and it will be interesting where we are a year’s time from now. But I suspect the move to virtual or digital, while not permanent, will have some meaningful persistence in our professional workflows [feels nearly permanent personally already!]. At AIR we believe firms that can position themselves somewhere between a pleasant and unified user experience and bringing efficiency to existing processes have a unique opportunity to lead in the area of Operational Alpha. Look for more on this from us in the future.


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