| One ‘common pool’ for the trading of all stocks may yet be a reality |
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| Looking to the future of the investment management industry, Des Doran predicts that in future there will be one ‘virtual’ trading exchange for each major time zone. |
As the old saying goes the only constant is change. In 1987 when the first issue of the magazine came out we were barely thinking of the removal of exchange controls - 15 years later we have a global currency.
Over the same period, many new investment managers have arrived on the scene, and quite a few familiar names have disappeared. Back then the Irish equity desk was the most important part of any fund management house in Ireland, now it is probably just an offshoot of the European desk.
The Irish financial services industry has coped with globalisation well. Not only in the increased overseas diversification of its funds but also with the IFSC, it has become a global player in its own right. Financial services are no longer the preserve of the relatively few but is now a major industry. Perhaps one side of the financial services industry, which had not been identified as an area of change 15 years ago, was the growth of the compliance department. Regulation was somewhat weak in those days; now the compliance department is a significant part of any investment management house and indeed represents significant cost. However, I think we can be pleased that standards in the Irish market and among Irish providers are as high as anywhere in the world.
Looking to the next 15 years, and I’m sure Finance magazine will still be around writing about it then, even if I will have safely retired, I think one major theme will be change in trading systems. At the moment we deal in a multitude of markets, mainly nationally based. It would appear to me that over the next 15 years we might move to a ‘virtual’ market approach. Why do we need stock markets in Dublin, London, Frankfurt, Paris, Amsterdam and other such cities? There is a broad cost driver to move to a market on the lines of the US Nasdaq system. After all where is the Nasdaq? The answer is somewhere on a computer. I believe we will move to a system where there is one trading platform for each of the three major time zones and that all dealings in stocks, for all countries will take place on these individual trading platforms. The functions of listing regulation of stockbrokers, etc will and probably should stay at a national level. But it will be good for investors if there is only one common pool for the trading of all stocks. The larger the pool, the greater the liquidity. The greater the liquidity, the lower the trading costs.
Another change we might see is perhaps the simplification of products. We already have made some progress with the arrival of gross rollup on all savings products. But in many countries there are many peculiar barriers between mutual funds, pension type products and life assurance savings products. It will be in the investors’ interest and indeed in the interests of the investment managers that these barriers are broken down. On the other side the range of these simplified products could increase further. Traditionally the Irish investor has been interested primarily in balanced funds or equity funds based in areas he knows well for example the UK, or mainland Europe or indeed Ireland and the US. With simple common products it is more likely that the sophisticated investor will want to invest in country specific and sector specific funds, which will in turn provide challenges for product providers.
We can all make predictions, undoubtedly in 15 years time many of them will be seen to be wrong. But one prediction that will be certain is that the trend towards investors providing themselves for their retirement, holding equity based products and taking an active interest in financial markets worldwide will increase. I am sure that magazines like Finance magazine will be there to help them in this. |
Des Doran is investment director - Ireland of Standard Life.
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| Article appeared in the June 2002 issue.
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