David Choate is COO at CAPIS.
What were the key theme(s) for your business in 2023?
The key theme and most accelerated trend we saw in 2023 was the proliferation of registered investment advisors (RIAs) beginning to outsource their trading capabilities. CAPIS is uniquely positioned to support this trend and, as a result, we’ve seen tremendous interest and growth this past year.
There are several reasons prompting this increased interest and demand for outsourced trading services from RIAs. As these firms continue to grow and diversify, their trading responsibilities have increased, forcing RIAs to accommodate unique preferences. Increased compliance requirements, management of multiple systems, and setting up new FIX connections are just a few examples of the mandatory steps that RIAs need to take into account as their businesses grow and evolve. During periods of rapid growth, meeting these needs is an ever-increasing challenge for RIAs, which makes outsourcing a more attractive option, especially as the demand for multi-asset strategies and “managed accounts” such as WRAP sponsors and custodial platforms, increases.
For RIAs, outsourced trading can remove the most complex, painful aspects of the trading workflow from their plate, enabling greater focus on strategy and client service – in other words, the aspects that make RIAs stand out from the pack. For all these reasons, we don’t see this trend slowing down at all in 2024 but rather envision it continuing to pick up steam.
What are your expectations for 2024?
Given the constant pressure on mid-sized RIAs and investment managers, we expect supplemental and outsourced trading solutions to be in higher demand.
Originally a hedge fund-centric offering, outsourced and supplemental trading solutions have crossed over into the RIA and traditional asset manager space. Increased compliance and regulatory requirements, more comprehensive business continuity structures, and margin pressures have all contributed to the increased demand for cost-effective trading solutions. Outsourced trading can also address key-man risk and help reallocate resources towards the primary organizational objectives…investment decision-making, client service, and client acquisition.
In 2024, we expect to see an increase in multi-asset class supplemental and outsourced offerings, including fixed income and derivatives. We also anticipate tighter commission budgets, and therefore, more focus on commission management capabilities.
In any case, we are excited to position CAPIS at the forefront of these trends. With a multi-asset class global trading desk and an industry-leading commission management offering, we are confident that our outsourced and supplemental trading solutions are well-positioned for growth in 2024.
