The Impact of Technology
IN PRINT ARCHIVE CIR Winter 2000
|The Impact of Technology|
|by J-F Courville and Jeremy Armitage|
Here we explore the transforming impact of technology on the investment world and analyze how investment managers will be able to extract more value from markets and thereby achieve even greater performance for their clients. History of the investment process
Over the past 30 years the investment process has enjoyed a steady evolution. The 1970s was the era of information transmission: global information firms digitized asset pricing data and news services to empower the investment world and radically improve the efficiency of the markets. The 1980s saw managers gaining access to effective portfolio modelling tools, allowing them to encapsulate the recent theoretical discoveries of Markovitz, Sharpe and others in their strategies. The 1990s brought us powerful tools in the area of trade order management, enabling asset managers to deal with the growing complexity and globalization of the investment process. We now find ourselves at the step of the Straight Through Processing era; managers will be in a position to trade assets across all markets on a streamlined basis, transferring their investment focus to their respective value-adding processes rather than the trade implementation process.
Benefits of technology
A whole area of our industry that is being revolutionized by technology, particularly the communications technology of the Internet, is that of market structure. In earlier generations, markets attracted liquidity by bringing participants together in physical proximity--at a physical exchange. Today many exchanges are "virtual," a collection of members connected by a network. We expect this process to continue, opening up availability to more and more participants around the world, with a virtuous circle of improved price discovery and liquidity.
J-F Courville is Managing Director, Global Markets at State Street Canada in Toronto. Jeremy Armitage is Managing Director of State Street Associates in Boston.