With more than £103 billion in third party assets under management in Asia, Allianz Global Investors is a sizable player in the region.
Kent Rossiter, the firm’s head of trading for Asia Pacific manages ten traders in Hong Kong, five in Taiwan and there are a further three traders based in Korea who follow a different reporting line.
Rossiter is well practiced at running operations, having held the position for some 17 years and his team is truly multi-asset, trading equities, fixed income, FX and some derivatives – mainly listed futures and options.
But, with Asia nowhere near as homogeneous as the United States or Europe, the team has had to become adept at juggling different working hours, holidays, regulations, languages and trading practices.
The vast swathe of regulations present a challenge, but one that Rossiter believes is met by being a part of the many industry groups locally in order to stay informed and share current thinking.
He is on the advisory committees of Liquidnet Hong Kong and FTSE (Asia Pacific) as well as the ITG Analytics Advisory Board. Most recently he has also participated at a variety of events including the Asia Trader Forum, Quorum 15 and TradeTech Asia.
Rossiter says while these sort of events are important, it can be tricky to juggling work obligations with the need to be involved in such working groups.
He says: “I do get involved in industry working groups but I have to balance my time. I can’t be at meetings, away from my desk all the time! You can learn a lot though. I talk with regulators, stock exchanges and give feedback on consultation papers.”
Some of the recent consultations that the team has been involved includes work on circuit breakers and volatility control mechanisms – a topic which paid to have knowledge of at the start of the year.
Other initiatives that the team have been working on are more specific to the needs of Allianz as an organisation and its clients.
Rossiter explains: “Internally, we are spending a lot of time monitoring the liquidity of our positions, fair valuation pricing, expanding our use and understanding of multi-asset automated trading solutions, etc.
“We spend time staying up to date on industry and broker initiatives for various types of block crossing, both in bonds and in the equity space. We are always looking at how… we can measure our executions against peers – a very elusive task!”
Within the business, Rossiter and his team have had a busy 12 months. They recently overhauled their Material Non-Public Information (MNPI) policy and updated their key contacts and ECM (equities capital markets) Syndicate desks.
The team are also in the process of a complete review of their Transaction Cost Analysis (TCA) results as part of an ongoing performance analysis project. Running alongside this, Rossiter is giving consideration to some new vendor technology solutions and is conducting a biannual review of broker services.
There are also a handful of brand new projects on the horizon. The start of 2016 signalled the beginning of a programme to streamline how the business executes FX trades.
Rossiter explains: “At the moment, we have several different processes and we’re looking to automate the way our portfolio managers enter FX orders and the way the desk trades them.”
In December, The Trade Asia interviewed Pan Yu Ming, a senior portfolio manager in the region. He said the relationship between portfolio managers and traders was a respectful one, where traders are credited with the knowledge to make an informed decision about trading venue and timescales for execution.
While this may sound entirely normal, other fund firms – specifically JP Morgan Asset Management – have previously said that the role of the trader should be more closely directed by portfolio managers.
Rossiter says this is a tricky issue and that “it really depends who you are talking about”.
“Some portfolio managers have an Implementation Shortfall in mind when they enter the order. They tend to want it to be done sooner rather than later while others will want it worked over the day. Then there are some that think their orders won’t have market-moving impact and spread their orders over many days.
“Whether we want to use a block crossing network, a broker or a self-directed DMA, it is left to us.”
A typical trading day for Rossiter and his team is pacey and varied.
He says: “We have a daily morning meeting where the portfolio managers, research analysts and a representative from the trading team sit down.”
Rossiter explains that because the daily meeting is held during market hours, one trader from the team joins the meeting while the rest keep things ticking over at the desk.
Much of this trust in the trading team exists as a result of portfolio managers’ belief in the traders and
Allianz has multiple training requirements for its trading team, which may go some way to building that relationships.
These training requirements cover everything from IT security to anti-money laundering, Know Your Customer (KYC), FATCA and Mifid II. There are also various other, smaller requirements.
Rossiter says: “There are a lot of requirements to stay up to date on. There is definitely more training and awareness now and more time spent on compliance matters and regulations than 15 – 20 years ago.
“It wasn’t like this when we joined the industry in the 1990s. There are more compliance matters now and they take up more of our attention. We must also have five hours of continuous professional training for our licences and I like our traders to take advantage of as many skill building opportunities as they can.”
For a senior trader with nearly two decades experience in the role, it is perhaps unsurprising that he takes most regulatory changes in his stride. When asked whether buy-side traders now face a more educated set of questions from investors than five years ago, he laughs.
“I don’t think they are drastically different now to what they were five years ago,” he says.
“Consultants may have a stock list of questions and clients send that to us, but they are all after the same thing. They want to be assured that the processes we have in place will benefit them, the client – that the fund manager will pick the best investments and that the trading desk can implement those investments with minimal impact.”
Rossiter says that his team will meet with clients when they come in for due diligence or when they are doing a pitch. Typically, if Allianz is shortlisted for a mandate, the trading team will be invited to speak about how they trade.
But Allianz, like most global asset managers with an Asia operation, has been trying to ensure that global standards are applied to this region. Aside from the differences in approach to regulation, this presents a corporate culture issue too.
Those familiar with how things are done in one part of the world are not necessarily aware of subtle differences elsewhere in the business. Rossiter says he believes people in other parts of the business could learn from the operation in Asia.
He says: “They could learn that things get done a little bit more slowly here. [There can be] difficulties in sourcing liquidity and this refers to both fixed income as well as equities. The amount of risk capital that firms are willing to commit feels like a fraction of what it was a decade ago. There is a tendency for market participants to like over-the-day trading instead of being liquidity seekers.“I also think the SFC’s requirement two years ago to require Hong Kong based traders using self directed algos and DMA was a sign of the future, and something that is likely to be adopted by regulators in other jurisdictions.”