The changing role of the CTO on the buy side

Technology is bursting out of its traditional roles on the buy side, with many hedge funds and asset managers recognizing it as a core component of their competitive advantage. The changes have come as firms seek a competitive edge in investing and are also driven by margin pressures as senior leaders are seek ways to improve efficiency, lower costs and generate new value.

At many firms, this has translated to a shift in how the technology function interacts with the rest of the organization. CTOs of asset management and investment firms have a complex, evolving set of responsibilities. Their roles may still be centered on operational management and infrastructure, but many firms are holding CTOs to an expanding list of expectations that involve company strategy.

Recent Bloomberg interviews with CTOs from buy-side firms in the U.S. showed how this dynamic role is evolving as technology becomes an ever more important focus. With technology and data now core drivers of the value firms deliver to customers, advancing transformational change is becoming one of a CTO’s top priorities. Bloomberg’s study found CTOs advocating for automation, collaborating on artificial intelligence (AI) and machine-learning initiatives and acting as key decision-makers in their firms’ migration to the cloud.

Yet CTOs’ growing significance as strategic partners doesn’t diminish their importance in day-to-day operations. “Keeping the lights on” and staying ahead of security issues will always keep CTOs occupied, and resources can be thin. For many CTOs, talent shortages and churn make it hard to coordinate regular hardware and software changes — let alone successfully lead transformation — without risking disruptions to the business.

Making a business case for more resources can help. Still, the current environment also calls for thoughtful consideration of how tech should be integrated into both the service-related and strategic plans of a business. Some firms still view tech as more of a cost center than a catalyst for innovation, creating challenges for those CTOs tasked with modernizing infrastructure: Should new technology investments be about efficiency and overhead? Or should they help push the firm toward new ways of doing things?

Balancing those priorities — and advancing the kinds of culture changes that can make doing so easier — is key for CTOs in 2020.

A push-and-pull of both proactive and reactive thinking is required of almost all CTOs. Various stakeholders in the firm need different things and have unique expectations. Tech leaders have to react differently when they’re asked to implement or create a requested solution than when there’s a unique idea they want to resource and execute.

For many CTOs — especially those closest to IT and the challenging problem of cybersecurity — it’s difficult to break out of the patterns of “reactive supporting” and “fire-fighting” long enough to work on value-adding or transformational initiatives.

Read more in our report CTO Perspectives.