Martin shares a refreshing and candid view on his trading experiences and challenges at Liontrust and gives an insight on his personal interests outside of his trading role to achieve a work-life balance. 

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With new regulations in place and market evolution in the fixed income space more prevalent than ever, this year has been an opportunity to call on my experience from both larger and smaller asset managers and apply that to the trading offering at Liontrust.

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Having worked for a large global investment bank, small event driven hedge fund and huge long only institution on route to Liontrust, what experiences have been applied in your time there?

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Liontrust is very different to everywhere else I have worked before.  It is a specialist fund management company that takes pride in having a distinct culture and approach to running money. We have two primary aims: to invest our clients’ money to try to help them reach their financial goals and to invest in what we believe are the best companies around the world, providing businesses with capital to grow.
We believe in the benefits of active fund management over the long term and all our fund managers are truly active.  We focus only on those areas of investment in which we have particular expertise. We have eight fund management teams that each have their own distinct strategies.  This offers me great exposure to different areas of the market, ranging from UK micro-cap equities, to US high yield bonds to sustainable investment products.  
Our fund managers have the freedom to manage their portfolios according to their own investment processes.  This culture in turn gives us the freedom to design and implement the best possible processes to deliver best execution across multi-asset classes.

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Since I joined the firm in 2016 we have experienced rapid growth in AUM, which has made the past couple of years both challenging and enjoyable.  It has presented the opportunity to add value and make a real difference to reducing risk, how we execute and to improve the performance of the funds we manage.
In addition to the growth and development at Liontrust, we have also experienced the biggest change in financial markets for a decade in MiFID II, which has asked questions of all market participants.

 

It’s been valuable to call on my experience in equity markets over the past 12 years to give context to the right route to take in the fixed income market, for which MiFID II seems to have been a bit of a shock.

 

The fragmentation of liquidity in the equity market is something the bond market can look at and hopefully avoid.  We do want more transparency and access to differentiated types of liquidity, but we probably don’t need ten platforms on the desktop to do so.

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This is where I see huge value in the Alpha Trader Forum experience.  A by-product of the fixed income pricing model is that the sell side are not incentivised to provide more transparency, this means connecting with peers has never been so important as we all try to shape the processes of the future.

 

Obviously with so many firms represented in the room there are going to be conflicting views depending on the size and shape of flow but if we can take note of the commonality in certain areas then we can all move forward a lot more efficiently.  This hopefully provides more time to focus on the individual hurdles we all face at firm level.

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Do you have any interests outside work that help counteract the potential challenges of the trading environment?

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I have quite diverse interests outside of the office, be it exercise to switch off after work or spending time with family when I get the opportunity. Generally, I can be found out riding a bike or doing some kind of water sport which is a benefit of growing up by the sea in Bournemouth. The Liontrust team has a healthy level of competition which keeps things interesting. We recently competed in The Royal Parks half marathon which was my first event since becoming a dad two years ago, so it was nice to have something to train for. Other office challenges have included 5km runs, 5000m row, a timed high-intensity interval training (HIIT) workout and most memorably the plank challenge. Trust me, as competitive as I am I’m not going to try to beat the boss’ plank time three weeks before bonus time!  On a serious note, it’s a good environment to work in, the hard work is balanced with an opportunity to unwind; a run at lunch or a gym session a few times a week is something we all benefit from and makes us more productive as a result. The next personal challenge is a half Ironman in July which I am really looking forward to as it’s great to have something to aim for to keep fit.  

 

Speaking of balance, I counter the good done by exercise with a passion for good food and travel which are my favourite ways to relax with the family.

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Has MiFID II been positive or negative for the buy-side fixed income trading role?

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Although there are always unintended consequences with any new regulation, on the whole I would say that the evolution of the market under MiFID II has been a good thing for the end investor. It has presented the opportunity to demonstrate how you add value as a trading desk and to differentiate yourself as a business.

 
A key area at Liontrust is the transparency we provide to the end client.  Being a specialist asset manager it enables us to be more nimble and to provide a more bespoke offering to both clients and consultants to really give them a feel for where we add value as a trading desk.

 

 

How has the trading role changed since your time at Liontrust?

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The multi-asset trading role has definitely become more data driven due to market evolution, which is something we try to embrace and use to our advantage. Although we really value the relationships we have with our execution partners we now have more quantitative angles than ever before to analyse execution quality, consistency of pricing and capital commitment, alongside the more traditional qualitative execution factors.

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Which areas do you think are vital to take trading to the next level?

 

Technology and use of data feature at the top of the list for most buy siders but these areas often require collective input to find a solution for the majority as they are expensive to setup individually. There is more data in the MiFiD II world due to reporting requirements but there isn’t one platform that can put it all together to enable the buy side to benefit from it. The top three fixed income execution platforms have an estimated 90% of the data between them but there is no incentive to share it to create a consolidated tape. The problem comes down to budget and resource and someone being willing to invest in a platform that puts all the pieces together, which is expensive.  Without clients willing to pay for that offering we are not in a position to move forward. I see this as the biggest challenge in fixed income which is preventing us getting to a more transparent market and having dependable reference points for our trading and analysis. I think the solution will involve a partnership between buy-side, sell-side and execution venues themselves in order to create a useful market utility.

 

 

Do the buy-side need more or fewer broker relationships to find liquidity?

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We currently connect to approximately 50 brokers although as you would expect 80% of the volume goes through the top 20 counterparties with the others providing more of a specialist service.  It obviously depends on the type of security you are trading, but in the credit market, the evolution of all to all functionality may mean that you can access more liquidity through fewer brokers or platforms going forward. The brokers will still provide a service, but it could become more time and cost efficient to use a platform as an aggregator for some of the liquidity out there in the fixed income market.

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Challenges ahead for fixed income…

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One of the biggest challenges we currently face is providing accurate and meaningful TCA for our clients. The data is available, but is fragmented across multiple platforms which means it takes a lot longer to consolidate your data, come to meaningful conclusions and find actionable insights. This is a common theme for other buy-side trading desks and with more detailed questions being asked by investors it seems like a key area for change in the coming months.
I see the liquidity landscape changing as more counterparts embrace the all to all trading functionality coupled with the reduction in capital commitment from the sell-side. One of the largest crossing networks in the equity space is slowly gaining traction in fixed income and I see that continuing as more institutions get used to the idea of it and build it into their workflow.
Another area of focus will be electronic market makers, and how we interact with them in general.  They are a large part of the volume in smaller size so for platform trades it may suit for certain flow -but do you want to open up to them all of the time when trading all to all?

 

 

Three tips that have helped me along the way

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Try and maintain a balance. The job is stressful which is easy to get drawn into, but make time in the day to take a step back and review processes and see where we can improve rather than repeating the same thing over and over again. 
Network. I think we can all do more of this but try and take a meeting or a call once a week with someone you haven’t met, it’s great to hear other people’s view on things and there are so many good people in this community to share common challenges and solutions with. 
Be honest, upfront and move on quickly. Again, it’s a very small industry so you need to be honest when things don’t go to plan but make a point of learning from it, improving processes and moving on are really important elements of any trading role.

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Read the article in The Buy-side Perspectives:  https://joom.ag/NN6a/p22

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