Investment opportunities in Investment Services
Today, companies in every sector need to give full attention to digital developments and digital technologies. The changes are vast and their impact is important for future strategies of all kinds. Savvy digital providers change the rules of the game, and as such, laggards who don’t adapt quickly enough become easy takeover targets.
So far in the investment services industry, digitization has led mainly to cost-cutting exercises. But tomorrow, digitization will shake the fundamental approach of financial businesses, including how services are provided. The business will become more virtual as technology such as digital wrappers enables the automatic monitoring and tracking of allocations and performances.
Yet strangely, not many players in the sector have an open minded approach to digitization; therefore, exploitable opportunities are rare at present.
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Close Brothers | CBRO | United Kingdom | 20 % | 5.64 |
| Investment case: Close Brothers is an investment services company actively exposed to the equity markets as well as to volume trading activity. In terms of digitization, this activity has a huge upside potential, externally and internally. | ||||
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Morgan Stanley | MS | United States | 14 % | 5.13 |
| Investment case: Morgan Stanley provides investment services of all kind: institutional securities, wealth management, and asset management. MS has a large securities distribution platform and an extensive web of relationships within its own organization as well as with external providers and clients. Further digitization should push efficiency more, and ultimately clients should be able to conduct more of their transactions themselves. | ||||
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Goldman Sachs | GS | United States | 7 % | 6.08 |
| Investment case: Goldman Sachs is a global investment firm with activities in investment banking, institutional client services, investing and lending, and investment management services. Goldman Sachs has a reputation for leading industry change; in this regard, one can note its successful track-record in migrating its equity business unit. In the past, GS has been lightning-quick to shift its business to respond to new trends and new economic realities. Given this, one would expect it to make a major roll-out in the near future. | ||||
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Macquarie Group | MQG | Australia | 8 % | 5.44 |
| Investment case: Macquarie Group is engaged in banking, financial, advisory, investment and fund management services. MQG has a number of strong businesses, in particular Macquarie Funds Group, where it has a reputation as a leading manager of global infrastructure. At the same time MQG has a capital intensive exposure to investment banking and capital markets. The consolidation of these services would bring substantial advantages to the company and its clients. Perfectly executing a digital transition would help the company address its ROE, which is well below the peer group average. | ||||