January 6, 2023

Traders Magazine: 2023 Outlook with Michael Pusateri

What were the key theme(s) for your business in 2022?

The credit landscape has long been in need of greater automation. Manual processes are widespread across credit manager workflows, and internal investment teams can often be overwhelmed by the depth and complexity of data they receive. These issues make it challenging for managers to locate the relevant information they need to make informed investment decisions, especially in more volatile market conditions.

We wanted to change this and make it easier for credit managers to monitor their exposures and credits by enhancing our portfolio management and financial tools. For example, we introduced financial template mapping which has provided credit analysts with more flexibility in defining financial metrics to help streamline workflows. This year, Siepe has also been helping credit managers outsource services, such as middle office, trade settlement, data management, and software to help them leverage their data as an asset. These services deliver greater control and flexibility for credit managers looking to optimize their portfolios, without requiring constant assistance from a third-party to gain insights.

How have macroeconomic pressures affected the asset management community?

Changes to monetary policy with multiple hikes in interest rates have caused credit manager behaviors to shift to monitoring free cash flow instead of being focused on leverage. This is because the rising interest rates have made it more difficult for them to take on new loans, particularly if the firm is a highly levered borrower. As a result, credit managers have become much more focused on eliminating debts to minimize the risks of overextending their operations. At the same time, the hybrid working model has continued to put pressure on asset managers’ IT infrastructure with many firms looking to set up cloud environments that can maximize productivity.

What are your expectations for 2023?

I think the second half of 2022 has proved the current instability in the technology sector, with many layoffs at prominent firms. The looming recession will likely continue this trend in 2023, as firms look to reduce headcount to try and remain profitable. This will mean that many asset managers will not have the resources to build and manage their own IT infrastructure. Furthermore, asset managers have become increasingly targeted by cybersecurity attacks in recent years which can lead to an array of problems if they are unprepared or lack resources to protect businesses’ sensitive information. As a result, I envisage that firms increase their outsourcing of IT infrastructure solutions to third-party vendors to solve these issues.