How does OptimX help fund managers improve profitability?

by Tim Dier

instruments to improve profitability

What is the aim of OptimX?

Financial markets are beset by hidden fees and conflicts of interest. The true cost of transacting in over-the-counter products, such as foreign exchange and interest rates, is often unknown and easily slips below the radar. But the negative impact on fund performance, ranking vs. peers, and manager fee income is very real.

Through a powerful combination of human and machine, OptimX saves you time and money by identifying, quantifying, and reducing these costs, without you adding additional headcount. The result is higher profitability and AUM for you, increased returns for your investors, and peace of mind that no stone has been left unturned.

Who are OptimX’s clients?

Our primary focus is on the investment management community, but recently we have received enquiries from corporates who are under pressure from input inflation and are looking for innovative ways to cut what they pay for financial services.

What our clients have in common is they possess a growth mindset and acknowledge that despite being top of their game there is always room for improvement, particularly in the functions or departments which have traditionally received less focus and resources.

We are typically engaged by the CIO, CEO or COO, and work in partnership across all departments to focus on where cost savings can be achieved. Our clients own the process and any recognition for improvements achieved. This is important, as we find that when clients witness tangible improvements first-hand it helps foster a culture of cost leadership, which further compounds returns to their bottom line.

How does it work in practice?

With today’s heightened volatility and patchy liquidity, procedures that worked well in benign markets are no longer effective; hence it is important to adapt. Firms can differentiate themselves by being innovative, embracing evolution, and developing enhanced intellectual property. The objective is to trade more efficiently and capture more alpha for your funds.

To achieve this, we complement our client’s existing operations with unbiased buy and sell side knowledge and expertise. We use select technologies where they will add value for you, but never for their own sake. Our approach contrasts with that of commoditised SaaS solutions that dominate the industry, but ultimately provide little competitive advantage to the user.

Our process usually begins with a health check to identify whether there are any quick wins. Many clients are aware that they may need assistance, but sometimes we can uncover processes that can be improved. However, we recognise that there can be trade-offs between excellence of execution and operational efficiency, and we aim to strike the right balance.

Recently, at a well-known asset manager, we discovered that trade execution was taking place in the back office of one of the firm’s satellite offices. We identified this issue, enabling the client to reduce their operational risk, centralise their order flow and help our client to save more than $1.2million annually, materially boosting their fund’s NAV and fee income.

At the other end of the spectrum, we undertake a comprehensive and detailed analysis of your hedging strategy and process. Analysis shows that the most important decisions, in terms of impact on your bottom line, start at the top with the type of execution strategy you employ.  With a plethora of strategies available it is no wonder that users get confused, but above all else the level of aggressiveness or length of execution window of an order is key. Beyond that, having a repeatable process that leads to a high-quality dataset is imperative for continued improvement over time.

A common misconception we encounter is that trading on a platform with multiple counterparties is sufficient to achieve optimal execution. We recently worked with a client who was trading in such a manner. Their execution quality had deteriorated meaningfully as their counterparties were struggling to risk manage their flow, in part due to signalling. Our proposed solution achieved better execution for the client, and with reduced market impact delivered a more sustainable outcome for their liquidity providers.

Throughout our engagement, data analytics complement our qualitative analysis to help deliver ongoing improvements to your bottom line. As we are both independent of banks and custodians, and do not run an outsourced trading desk, we are able to take a more holistic and objective view in delivering value for our clients.

Why engage OptimX?

We believe there is a huge opportunity cost for not doing anything. Many investment strategies are facing challenging markets and increased cost pressures. The long period of low and stable interest rates is over. Hence, there has never been a better time to re-evaluate your processes in the search for treasury alpha. Many of your competitors are already on this journey, and the efficiencies they achieve will be what helps differentiate them in years to come.

OptimX’s ethos is to partner with you for the long term, in a discreet and sustainable manner. We ask intelligent questions and strive to transfer knowledge and expertise. We break down the jargon, help remove the opacity, improve clarity, and ultimately help save money for you and your investors.

We recognise that each client has different circumstances, so we offer a variety of engagement models, including staff augmentation, managed service, and one-off basis. But whatever your requirements, we will create a way to partner with you on solutions to save your firm money and enable you to focus on what you do best: generating returns for your investors.