There is room for improvement in the relationships between portfolio managers and traders, and without taking advantage of their potential funds could miss out on alpha.
Traders need to be made more aware of portfolio managers’ objectives, stated Christie Goncalves, assistant portfolio manager at Rathbones Wealth Management, during this year’s CMX event, explaining that they need to be able to see how their work is contributing to the overall fund performance.
It is important that they understand exactly what the managers are interested in, added Ash Sharma, global trading analytics manager at Aviva Investors, and can therefore provide relevant information and targeted analytics. Communication in this space is vital, and will both improve fund performance and empower traders, the panellists explained.
The primary function of the trading team is to highlight liquidity opportunities and big movements in assets, explained Martin Hendry, head of trading at LionTrust Asset Management – information that portfolio managers are responsive to.
Traders have access to tools and platforms that portfolio managers do not, added Goncalves. Enhanced dialogue between the two groups could facilitate greater insights and understanding, allowing for the trade of ideas along with the trades themselves.
However, there are barriers in place that prevent these relationships from reaching their full potential. There are variations in how interested portfolio managers are in analytics, explained Sharma, urging traders to build on their existing relationships with managers and show them how analytics can help them. Even if things are already going well,
“If there is alpha to gain, why would you not want to improve performance?” he asked.
Portfolio managers need to be more proactive than reactive, Sharma suggested, using concern around the use of high-cost trades as an example. Taking part in meetings with traders to fully understand the decisions they are making and the opportunities available to them would ameliorate this, he continued, contributing to a more symbiotic and productive relationship.
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