Breakthroughs on the Buy Side: Alexander Morris
Breakthroughs on the Buy-Side
Alexander Morris
President and Chief Investment Officer (CIO) | F/m Investments and CIO of Diffractive Managers Group, (the parent company of F/m Acceleration LLC)
Alexander’s Washington, DC firm F/m Investments is part of F/m Acceleration, which provides institutional-grade investment systems, business operations, and marketing support to boutique, lift out, and overseas asset managers.
We want to be a regular provider of high-quality, differentiated content in both the traditional and the alternative spaces, and to continue to grow that presence.
Q. What are you and your firm currently focused on?
We focus on working with investment managers who we think can add substantial value. What I’m trying to focus on is taking all of the various firms that we’ve acquired or invested in and looking at them as ideas and capabilities we have. We do not innovate for innovations sake; rather we focus on creating value for investors. Innovation is an interactive process of keeping what works and discarding what does not, often finding what solutions you did not originally imagine — that is a feature not a bug. What can we do that can actually add value to investors five years from now or 10 years from now? What can we do better than some of the larger firms who traditionally haven’t been able to move as quickly and haven’t been able to provide the same level of client engagement or experience they might have? And what does that look like for us from a long-term sustainability standpoint? We may have great ideas but we also need the right systems, people, and streamlined operations to allow us to scalably grow and to grow fast. The opportunities for boutique firms like ours to grow don’t present themselves over the course of decades, they present themselves over the course of quarters — so we need the ability to strike quickly and to make that meaningful, without errors, without issue, and without concern. And we need to do that scalably and cost effectively.
For example, in August we filed a novel exemptive application with the SEC, seeking to add a mutual fund share class to each of the US Benchamark ETFs . Whilst most of the industry is trying to add ETFs to mutual funds we see the benefits in doing the reverse — making the innovations of the ETF marketplace available to investors who either require or prefer use mutual funds. Today that is a $6 trillion space largely locked out from ETFs.
Beyond “pure innovation” we also use our capabilities to continue to deliver high quality to more investors. investments. We also see the benefits of continuing to Beyond Last month we launched an actively managed credit fund XFIX, the F/m Opportunistic Income ETF, which brings a stellar SMA product to a wider audience.
Q. When was F/m Acceleration founded, and how has the firm evolved since then?
One is the straight-through processing of everything. It’s not a different process to deal with equities or bonds or bank loans or options. It all sits in the same place. It integrates with our same portfolio accounting engine and security clearing process — even though each security may have its own process unto itself, the mechanism of how we engage with that is substantially similar. And the key technologies from third parties are integrated for us, so we don’t have to worry about managing other vendors for industry standard things that are beyond our remit.
Another thing that’s interesting for us is just the integration of all the Terminal elements — the ability to have a chat with someone that turns into a trade that turns into a settlement that turns into a position that’s now accounted for with corporate actions and performance and tax lots and everything else. It all makes for an effective tool that we need, will continue to use, and will continue to grow upon.
The opportunities for boutique firms like ours to grow don’t present themselves over the course of decades, they present themselves over the course of quarters — so we need the ability to strike quickly and to make that meaningful, without errors, without issue, and without concern.
Q. What is the US Benchmark Series and what makes it so innovative?
It is a suite of ten single-Treasury ETFs. We track each of the major benchmark securities on the yield curve.
The idea is that investors now have access to all of those securities, and if they have a position on the yield curve they want to take they can do that. If they have a bond portfolio — ETFs, mutual funds, or actual bonds that they bought or someone’s bought for them — they can readily change the duration, maturity, or yield characteristics of that portfolio without having to go and trade that. If they hired a third party for an ETF refund or an SMA (separately managed account) and that party makes changes to the portfolio when a user wants to have a different end dynamic, they can now do that quickly and reliably without having to check every day to see what the end characteristics were. We’re that constant spot on the curve, we stay exactly on that spot on the curve, and that reliability has been effective. Because we’re an ETF you can short it, you can play rates going up, you can do spread trades, and there’s a listed options market audit. You have all the same tools that a professional rates and swaps trader would have access to, just now in a more accessible vehicle designed for retail to institutional users and all stages in between.
Q. How do you see F/m evolving over the next five years, and what role will Bloomberg technology play in that evolution?
My hope is we go from being a name that you hear about because we pop up in the media from time to time, and because we did this thing called the US benchmark series, to being one of those firms that is always out there doing innovative things. We don’t want to be a one-trick pony, we don’t want to be known for taking a gamble on something that was interesting that just paid off. We want to be a regular provider of high-quality, differentiated content in both the traditional and the alternative spaces, and to continue to grow that presence.
Bloomberg’s coming along for the ride just as long as they’ll have us. It’s core to our way of acting and our business. When folks come to us and ask us what’s the secret sauce [to our success], our answer is twofold. One is that this isn’t a nine to five job, this is a five to nine job. And the other is to hire Bloomberg. There’s no real secret about that, and I don’t see that changing anytime soon.