Photographer: Krisztian Bocsi/Bloomberg

Quants Are Key to Survival for This Boutique Manager

  • Automation is not about replacing jobs with robots: Frick
  • She says firm must grow 5-10% a year to invest in technology

Unigestion SA boss Fiona Frick says her firm needs to grow 5 percent to 10 percent a year just so it can keep investing in the technology that will safeguard the asset manager’s future.

“As a boutique manager you have to be innovative -- if you don’t innovate you die,” the chief executive officer said in an interview from the firm’s offices in the West End of London. “It’s very Darwinistic.”

In an industry that’s struggling with layers of regulation and competition from cheaper alternatives such as exchange-traded funds, money managers are finding they must adapt to survive. Some of Unigestion’s larger competitors have sought safety in mergers to protect profitability by cutting costs. Swiss-born Frick, however, wants to keep the $24 billion asset manager as a small specialist firm that gets its edge from automation and artificial intelligence.

Frick first introduced Unigestion to machine-learning techniques when she was head of the money manager’s equities division in the 1990s. She insists she’s not afraid of technology; and neither is she averse to dumping successful investment strategies that she judges have run their course.

The firm shut down its hedge-fund-of-funds business 10 years ago to develop an alternative risk premia product, a type of factor-investing strategy that uses quantitative models to try to deliver market-beating returns for less money.

“The $4 billion that we had in hedge funds has become $4 billion in liquid alternatives,” said Frick. “You need to have your products evolve with your clients and you need to have your investment process evolve with technology.”

Rising Demand

Unigestion’s entry into factor investing was good timing, with its assets more than doubling in five years. Demand for such products is climbing across the asset-management industry, particularly among institutional investors, according to an Invesco Ltd. survey last month.

While Frick plans to keep investing in artificial intelligence, she says machines will never fully eradicate humans from the investment process. The company employs an equal number of quantitative fund managers and traditional stock pickers who are made to work together.

The CEO is also looking at using technology for the operational side of the business, and recently interviewed consultants about how much it would cost to automate certain repetitive tasks. The answer, it seems, is quite a lot. To simply copy-and-paste data between spreadsheets might cost $40,000. For more complex tasks? $120,000 per process, she said.

This has made Frick more selective about precisely which processes to automate. She insists automation is not about replacing jobs with robots; rather it’s about freeing up her 227 employees to do other things to make the company more efficient.

“Key to our survival is to make sure we always evolve,” Frick said. ”We will never be able to be a BlackRock, so it’s more about making sure we keep the mindset of a being a boutique.”

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