As nations around the world began shelter in place orders, CFOs, CTOs, and Research Directors began evaluating their research technology stack spend. The second impact of the crisis has been on budgets. Arguably one of the most influential Bloomberg terminal features is chat and yet it wasn’t enough to maintain collaboration. Without strong collaboration and communication, these teams really struggled to adapt. Fundamental research relies upon analysts and portfolio managers deeply understanding organizations or investments as a team. Perhaps the most notable capability lost in this transition is not the data feed at the core of these terminals, but the lack of dynamic collaboration that drives high-quality fundamental research.
Having that many people suddenly lose their terminal access (despite vendors like Bloomberg scramble to open up their “access from anywhere” features) caused a major disruption for investors and corporations alike. Also, one of the worst-kept secrets in equity research is the sheer number of market data terminals that are shared by 5, 10, even 20 people in an office. Why have asset managers struggled to adapt to work from home? Many firms had simply not built any type of contingency plan for adapting processes, human interactions, and technology for remote work. Samples from recent earnings call transcripts to point to an interesting couple of weeks for those leading these teams. If the largest public asset managers are an indicator, a significant number of portfolio managers and analysts suddenly found themselves working from home without the research, collaboration, or communication tools they needed to effectively do their jobs. With the growth of quant-based trading, investment management firms are increasingly known as technology-driven businesses, but the reality is that many of these organizations had been slow to adopt cloud computing technologies that would have allowed them to more easily transition to a remote work environment. I’ve written previously about the impact of work from home on specific technology stocks, such as Zoom.
First, the instantaneous shift to work from home for an entire industry in New York, London, Hong Kong and beyond, and second, the reality of a deep recession forcing us all to reevaluate the long-held idea that using these terminals is just the (high) cost of doing business. Having indexes drop 30% over the course of a week and then rebound over the next few months brings a lot of viewers and eyeballs to news services, but has also exposed two fundamental weaknesses in the thesis that portfolio managers and analysts will continue to use this mainstay of equity and market research. But in the eyes of banks, abandoning chat altogether might not be a feasible option.Coronavirus Exposes Weakness in the Bloomberg Terminal Modelīloomberg’s terminal business has been scrambling to react to the new reality of the coronavirus-impacted institutional investment market. It’s unclear if buying a stake in Perzo could ever eliminate those kind of risks. In January, Goldman indicated that it might bar traders from person-to-person messaging over Bloomberg, Yahoo, AOL, and other third-party chat services. Barclays, Citigroup, and Royal Bank of Scotland placed bans on certain types of chat rooms and other firms considered taking similar steps. Late last year, it seemed that banks had had enough with the trials and tribulations of chat. Indiscreet instant messages have also been key to documenting the LIBOR scandal, earning banks fines from regulators, and revealing some classic Wall Street vulgarity. Tensions developed between banks and Bloomberg last spring after it came out that Bloomberg News journalists had essentially reverse-engineered the terminals to spy on high-profile clients for reporting purposes. Inertia aside, it’s certainly about time that Goldman and its peers looked into overhauling their chat functions. Banks have sought to get clear of Bloomberg messaging before-at Goldman, the project launched in 2013 under the nickname “Babel.” But banks have struggled to escape a program that is so entrenched in the industry the Bloomberg system has an estimated 320,000 users in its directory. If banks did invest in and adopt Perzo, it would likely become an alternative or replacement to the chat function in the $20,000-a-year Bloomberg terminal that is used by most people in finance.