Buy-side traders beware: outsourcing set for revival

Linear Outsourced Trading 

Linear Outsourced Trading’s Paul Walker-Duncalf featured in Tim Cave’s Financial News article (May, 2016). The full article can be found on Financial News 

“Paul Walker-Duncalf left as BlackRock’s global head of equity trading in May 2015 to move to an outsourced trading operation. He joined a team at prime broker Linear Investments to carry out trades for fund managers at small and medium hedge funds and asset managers.
Walker-Duncalf said: ‘The regulatory focus has moved to the buy-side in recent years. As a result, costs have increased at a time when performance has been challenged and there has been a shift from active to lower margin passive investment. This has been reflected in earnings and has resulted in cost-cutting at a number of asset management firms’”

Further echoed by quotes from Michael Horan, head of trading at Pershing, a BNY Mellon company, Paul Walker-Duncalf goes on to discuss the cost of in-house desks.

“…the cost of a ‘fully loaded’ trader has been independently estimated at as much as £300,000 a year. That figure includes salary, pension and infrastructure costs such as a Bloomberg terminal. Multiply that by the number of traders and it ‘becomes a significant cost that many small or mid-sized firms can no longer afford’…”

Continuing to discuss the benefits and the increasing necessity of outsourcing, Walker-Duncalf goes on to highlight the impact of MiFID II:

“‘Outsourcing trading, particularly where the manager does not have a trading desk, demonstrably separates execution and research. In addition to unbundling, changes in the way research is priced, together with some firms deciding that research payments should not be generated from trading commissions, will further strengthen the argument for outsourcing.’… Mifid II will force a wide variety of costs on asset managers, as well as requiring them to more vigorously pursue best execution…”

In summarising Outsourced Trading, Paul Walker-Duncalf addresses asset manager fears of information leakage and lack of control, however restates that Linear positions itself as an extension of the firms for whom it trades, managing these potential conflicts with years of buy-side experience.


For further information on Linear Outsourced Trading, visit the page here