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Rising to the challenge: Lessons learned from an extraordinary year

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For most of us, the spring of 2020 is going to stay in our memories for a long time. As Covid-19 began to spread, financial services providers undertook what can only be described as a military-style, mass evacuation. Virtually any firm that was in the business of buying and selling financial assets was forced to abandon its offices and set up remote trading operations practically overnight.

Financial districts in cities around the world became ghost towns. Soft turrets were installed in people’s homes and spare rooms were converted into one-person dealing operations. New challenges emerged. Makeshift sound-proofing became the norm as traders learned just how loud a barking dog or an upset small child in the next room could be.

The number one priority during this unique period was to keep world financial markets acting as normal. In any services industry, there is always going to be a tremendous amount of behind-the-scenes activity that the customer will never see. The business of trading on behalf of asset managers across the globe is no different. The conditions may have been extreme, but the goal remained the same. Portfolio managers needed to be able to respond to some of the biggest swings in asset prices they had seen in their careers.

So how, collectively, did we all do?

It’s fair to say that financial services providers en masse rose to the occasion. A survey by Greenwich Associates last spring found that six weeks into the pandemic, 90% of portfolio managers and traders were satisfied with their ability to have full access to what they needed to do business, including access to providers. Most of them said they were highly satisfied.

At Cowen, we’re immensely proud of the role we played in helping our clients to conduct their business effectively and efficiently.

And as we look back on this unusual year, it’s worth pausing to reflect on what allowed us to keep the operation moving forward. Covid-19 may have been exceptional, but we know that there will always be new challenges and that the lessons learned from this period will be valuable for the various “unknown unknowns” we face.

For us, three rules made all the difference.

Rule No. 1: Knowing your customers

One of the first rules for any service-oriented firm is to understand the customer. As we see it, an effective outsourced trading desk provider needs to act as an extension of its clients. The relationship between the client and the outsourced trading desk must be truly seamless. When that happens, a trader is able to not only meet the client’s requirements but also exceed them and even anticipate future needs.

Given the nature of our business, seeing things from the perspective of our clients comes naturally. We have a deep understanding of the complexities and time-sensitive nature of our customers’ business because all of our traders and supporting staff have plenty of experience with complex, high-pressure situations themselves. To provide trading services for asset managers, you need knowledgeable, veteran traders who understand the demands of performing in fast-paced, chaotic environments. That leads to the next rule.

Rule No. 2: Not accepting failure

In the film Apollo 13, the character representing the director of Mission Control, Gene Kranz, famously utters the words, “Failure is not an option”. Cowen may not be in the business of ensuring astronauts return safely to earth, but we believe the phrase is certainly applicable to our work.

When the pandemic began to gain momentum, Cowen recognised that neither we nor our clients had the luxury of time. If we were going to ensure that our hedge fund and asset management clients were able to perform, we needed to work with military precision and let nothing prevent us from carrying out critical tasks. We pride ourselves on the fact that our operations did not suffer a single interruption. During much of this early phase of the pandemic, it was imperative for firms to make fast decisions and spare no expense when focused on the operation. That type of mindset occurs when firms think in mission-critical terms and adopt Kranz’s maxim.

Rule No. 3: Looking beyond the horizon

Managing the early phase of a crisis certainly required decisiveness and a commitment to operational integrity. But it soon became equally important to look further out. This is where we believe that Cowen set itself apart from other firms in our sector.

Not only did we meet the trading needs of asset managers around the globe, but also, we embarked on a major expansion of our services. Even as the pandemic was raging, Cowen was investing in our technology and our people.

Recognising that our clients are increasingly looking at multiple asset classes and geographies, Cowen has added additional resources to an already large team. We recently wrote about how multiple asset class funds represent the fastest-growing segment of the asset management industry, with some $11 trillion in AUM. 

Despite the constraints imposed by Covid-19, we were able to launch operations in two new areas. Cowen introduced a 24/6 FX trading service as well as a credit trading operation. This has led to wider trading capabilities for us, and also a more diverse client base.

A key point to bear in mind in all of this is that our expansion plans had begun well before Covid-19 struck. We had been approached by large institutional investors over the past few years expressing interest in Cowen offering an expanded service. It has probably been tempting for many firms to put all their plans on hold due to the extraordinary nature of what we’ve all just been through. But we felt differently. We knew that our customers were keen to have more options for meeting all their trading needs. Given that, we felt it made no sense to delay.

The future

It’s clear that we have emerged from the upheaval even stronger than when it began. We attribute this outcome to our belief in the three rules just mentioned and to the dedication of a highly accomplished trading team.

One of the main arguments for an asset manager to work with an outsourced trading desk provider is the fact that the client is able to get far more knowledge and experience than they would ever likely be able to build for themselves. This past year, our clients received something extra. They received an unbending commitment to excellence in the face of a truly exceptional situation.

Winning the HFM European Services Award for best outsourced trading provider is an honour and a reminder of how important it is to stay client-focused no matter how disruptive and unusual the situation. Looking ahead, Cowen fully intends to keep its focus squarely on the needs of our clients. More than anything else, the past year has shown the value of that approach.

Get in touch

Reach out to us directly for more information.

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