As you may know and appreciate, because of our position in the ecosystem we have a great seat in seeing how technology is impacting and changing the capital markets. We see how it’s changing the sell side – especially around distribution, personalization, research creation, sales, and client coverage. We see how it’s changing the buy side – as it relates to content and product access, broker voting, thesis creation, collaboration, and other pain points. We also see the pain points around asset manager distribution – whether related to IA marketing and sales, or LP prospecting and updates. We also see corporates, PE/VC funds, other software providers, and all other market players. We get a front row seat to observe (and hopefully contribute to) the major changes driving the industry forward. This should give you some interesting perspectives and updates on new ways of thinking, new tools, and new approaches as the industry evolves. With that in mind, let me begin:
What is the future of corporate access? Probably not a marketplace. Joining a crowded space, a new company called InterAxS is the latest entrant to the corporate access market (which already has at least a half dozen players). The approach companies are taking in this space feels very similar to the research market place space – a kind of “build it and they will come.” I’ve talked to a lot of companies in this space (corporate access marketplaces), and almost all of them are struggling from an event liquidity perspective, and those that are actually able to get some event traction then struggle from an economic perspective. It’s a hard business to do on it’s own. It makes me think of Roboadvisors on the investment management side – are they a stand alone product, or a feature of a larger product? Like we’ve seen for Roboadvisors, corporate access also feels like it’s more of a feature. My guess is we’re going to see some consolidation in this space over the next 12 months.
How to cover private equity clients? One of the biggest continued trends we’ve seen is the emergence of private equity clients as a powerhouse, as more capital looks for private or control deals. Now we’re seeing that the line between hedge funds and PE funds is blurring. Business Insider had a great article on the talent war that is growing, which really captures the essence of their collision course. From the PE firms we’ve been working with, we hear more and more that they want an easy (read: not cumbersome) way to access research and commentary, and also analyst/expert time. They’re willing to pay, but are lower frequency. How this fits into the evolving sales model will be important as this client segment becomes more and more valuable. Additionally, we’re seeing more and more PE funds look to create centralized collaboration platforms, where they can share deals, ideas, commentary, research, and other materials, and also build and manage investment theses. This is done quite primitively right now.
The Fintech herd is thinning – we’re going to see a lot of consolidation over the next 12 months. MiFID II was a big catalyst for change, or at least, was supposed to be a big catalyst for change. A lot of companies that were started over the last 3-5 years based their core assumptions around the fact that MiFID II would change market structure and behaviours. Perhaps it has, but not anywhere near the degree that people thought it would. Now we’re going to see a lot of consolidation in those companies. I spent a lot of time with research providers – from bulge bracket firms, down to independents, from all over the world. I can tell you that not a single one has ever told me “I’m making a lot of my revenue from [insert marketplace].” As it turns out, in order to get someone to buy something, you usually have to reach out and sell it to them. Recently, Liquidnet announced it purchased Research Exchange from the UK. I expect we’re going to see a lot more acquihires in this space as some of the larger players look to take a swing at the marketplace model in a cheap way (I personally doubt they will see any more success, but we’ll see!)
Liquidnet buys Research Exchange:
In the coming weeks, we’ll continue to share our view on the Capital Markets Fintech, and Technology landscape. We hope to provide you with interesting perspectives and updates on new ways of thinking, new tools, and new approaches as the industry evolves. Please subscribe below to keep up to date.