2025年資本市場(chǎng)愿景（英）-81正式版

TowardstheMarketsofTomorrowCapitalMarketsVision2025IntroductionSell-SideBuy-SideMarketInfrastructureConclusionIntroduction38FinancialMarketInfrastructure:ExchangesandAssetServicing58Sell-Side:InvestmentBankingExecutivesummary5861666871Exchangestoday:Fightingforlistingstoachievea“dominoeffect”onrevenuesTheexchangesvisionfor2025:ThefullyautomateddigitalexchangeofthefutureAnactionagendaforexchangesExecutivesummary811Investmentbankingtoday:Seekingtorecoverfroma“l(fā)ostdecade”Theinvestmentbankingvisionfor2025:PeopleandtechnologyaskeyassetsAnactionagendaforinvestmentbanking1620Assetservicingtoday:Astrongfocusonpost-tradeservicesTheassetservicingvisionfor2025:AdigitalindustryAnactionagendaforassetservicing?rms7476Buy-Side:Asset&WealthManagementandPrivateMarkets26Conclusion78Executivesummary26323538404447495356Assetmanagementtoday:ThepressuretotransformTheassetmanagementvisionfor2025:AnewplaybookinactionAnactionagendaforassetmanagersWealthmanagementtoday:Astoryofclient-driventransformationThewealthmanagementvisionfor2025:BusinessmodelswiththeclientatthecenterAnactionagendaforwealthmanagersPrivatemarketstoday:Theindustry’spro?tengineTheprivatemarketsvisionfor2025:Creatingthedigitallyenabled?rmAnactionagendaforprivatemarkets?rmsCapitalMarketsVision20252IntroductionSell-SideBuy-SideMarketInfrastructureConclusionIntroductionAnindustryfacingarareopportunityTheglobalcapitalmarketsindustrysawmostlylimitedrevenuegrowthintheyearsleadingupto2020.1Atthesametime,?rms’economicreturnsvariedwidely,withmanyindustryplayersfailingtobeatastandardizedcostofequitycapital.Combinedwithpersistentstructuralcostissues,thesecharacteristicsallsuggestedanindustryinthelatterphasesofitseconomiccycle.CapitalMarketsVision20253IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAfocusonrealizingdigitalvalueFromtheheavilyskewedcapitalmarketsindustryoftoday…ButthenCOVID-19camealongandde?nedtheindustry’slandscapein2020.Andwhilethepandemichashadaterribleimpactonhumanityandmanysectorsoftheeconomy,ithasalsobroughtthesell-sideandtheexchangesanunexpectedrespitewithrevenuesatnear-recordlevels.Thebuy-sidesawstronggrowthinassetsundermanagementandhighinvestorinterest.Overall,capitalmarketsindustryrevenueswerestableinlightofunprecedentedeconomictimesandshort-termpro?tabilitywasstrongformany?rmsin2020.InourCapitalMarketsVision2022reportpublishedthreeyearsago,weidenti?edtheprimarydriversofindustrydisruptionincapitalmarketsasbeingtechnology-ledinnovationandthecreationofnewdigitalvaluechainsacrosstheindustry.2Todaythesetrendsremainfundamentallyconsistent.So,whathas

changed?In2020,thecapitalmarketsindustryasawholegeneratedsome$1.12trillioninrevenuesandaround$119billionofeconomicpro?t.However,asectoranalysisrevealsthatthedistributionofthisvaluecreationwasheavilyskewed.Intheinterveningthreeyears,wesawevenmoreadvancesintechnologyandprofoundshiftsinmindsetsthanpredicted—inpartforcedbytheglobalpandemic.Inourview,boththescopeforchangeandthewillingnesstoexecuteithaveincreasedmarkedlyintheindustry,therebyrede?ningtheartofthepossible.Webelieve?rmsshouldcontinuetheirdrivetounlockgreaterdigitalvalueand,asCOVID-19’simpactgraduallyrecedes,capitalizeonauniqueopportunityforcreatingthecapitalmarketsoftomorrow.Thebuy-sidegenerated65%ofindustryrevenuesandamassive90%oftheeconomicpro?t(see?gure1).Thisdominanceispartlyduetothebuy-side’s“capitallight”businessmodel.Themore“capitalregulated”sell-sideandmarketinfrastructurebusinessesshared35%ofthetotalrevenuepoolincapitalmarketsbetweenthembutgeneratedjust10%oftheeconomicpro?t.Webelievethattheindustry’spandemic-drivenreboundisagoldenopportunitytoaccelerateinvestmentsinnewtechnologiesandnewwaysofworking.Fromcloudtoarti?cialintelligence,leadersshouldseizethechancetopreparetheirbusinessesforthenextwaveofdisruptionandstriveforlongertermsuccesstoday.CapitalMarketsVision20254IntroductionSell-SideBuy-SideMarketInfrastructureConclusionThisgapissomewhatduetotheseismicshiftsintheregulationofbanks’capitalbasessincethe?nancialcrisis.Figure1:Breakdownofcapitalmarketsindustryrevenuesbysector,2020US$Billions62However,thedisparityhascontinuedtowidenintheyearssinceourlastmajorreport.Backthen,?guresfor2017showedthesell-sideandmarketinfrastructurecompaniesaccountingfor13%ofeconomicpro?t—asharethathasnowdroppedto10%.177305673Cost1,128189EquityCapitalCharge7216689Capitalreturnsaside,theindustryonanaggregatedlevelhasn’timprovedoverallef?ciency.Ourcalculationsputtheaveragecost-incomeratioofcapitalmarkets?rmsat66.7%basedon2020numbers,whichisnearlyunchangedfrom2017(65.3%).Whileinvestmentbankingandexchangesshowedsomeimprovement,therehasbeenariseofcost-incomeratiosinassetmanagementandassetservicing.Thatisnotasustainabletrendfordeliveringvalueinthefuture.170Taxandother235119Top16OtherMarketWealthAssetPrivateHedgeFundsTotalEconomicEconomicInvestmentInvestmentInfrastructureManagers,ManagersMarketsRevenueExpensesProfitBanksandCIBsBanksandCIBsandAssetServicingPrivateBanksandBrokersEconomicProfit$5.9bn2.5%-$1.4bn-1.6%$6.8bn9.5%$27.3bn14.4%$27.1bn8.9%$37.8bn21.3%$15.6bn25.2%$119.1bn10.6%As%ofrevenueCapitalMarketsVision20255IntroductionSell-SideBuy-SideMarketInfrastructureConclusion…towardsthemarketsoftomorrowSteeringlarge,complexWhiletransformationisaconstantineveryindustrytoday,weseetherateofchangeintechnologyevenfurtheracceleratingthe?uxincapitalmarketsasweprogresstowards2025.Webelievethattradingvolumeswillcontinuetoriseundertheimpactofincreasingglobal?nancialsophistication.Theadditionoftokenizationcouldalsoopenupnewavenuestoinvestandlendwhilereducingthecostsofdoingso.Thisrepresentsbothanopportunityandathreatfortheentirecapitalmarketsindustry.Asaresult,inourview,thebiggestchangestocometothecapitalmarketssectorsinthenextphaseoftheindustrywillbeasfollows:organizationsthroughtoday’senvironmentandsettingthemupforsuccessisnevergoingtobeeasy—andit’shardergivenafutureinwhichdisruptionwilllikelyaccelerate.Andwhilenosingleplanwillberightforevery?rm,webelievethatthereisacommonsetoftoolstobeginthejourneytobeinganindustryleaderincapitalmarketsby2025.Eachsectorintheindustryhasitsownindividualchallengesandopportunities,andwewillstartbylookingintothespeci?csofeachsectorinthenextchapters.Sell-side?rmswillacceleratetheirstrategictransformationprograms,bothintermsofchangingbusinessscopesandperimetersandalsoinreshapingthecostbasetodriveconsistentlyhigherpro?tability.Buy-side?rmsareexpectedtoincreasinglybecome“digitallynative”—meaningtheywouldinfusetechnologyacrosstheiroperatingmodels,includingintotheirinvestmentprocess,clientinteractionsandorganizationalculture.Also,theperceptionsofbuy-side?rmswillbegintoshiftfrombeingalphageneratorstobeingholisticstewardsofcapital,focusingonreturnsasjustoneofmanymetricsacrosstheenvironmental,socialandgovernance(ESG)spectrum.Thissameethicalcompassshiftwilllikelyalsobecomepervasiveacrossthewidercapitalmarketsecosystem.Financialmarketinfrastructureplayerswill?ndcompetitionintensifyingasexchangesandassetservicing?rms’clientsstarttodisintermediateandcompetewiththem.TheMembersExchange(MEMX)isacaseinpoint,butcompetitioninareasfrommarketdatatosettlementandcustodycouldalsoincrease.3CapitalMarketsVision20256IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAboutourmethodologyIndevelopingourvisionforcapitalmarketsin2025,weanalyzedpubliclyavailable?nancialinformationfromover140capitalmarkets?rmstode?neaclearviewofpro?tabilityattheindustryandsector-level.Weexploredtrendsovertimeusing2020business?nancialresultsasabaseline.Wecalculatedeconomicpro?tasayardstick,deductingfromrevenues:creditlosses,fulloperatingcosts,taxesandthecostofequitycapital.Whilethecostofequitycapitalwilldifferbycompany,sectorandregion,tofacilitatecomparisonsweappliedastandardizedrate(10%)acrossourresearch,generatinganabsoluteeconomicpro?t?gureforthecapitalmarketsindustryasawhole,eachsectorandtheunderlyingcompaniesinvolved.global,leading,publicly-tradedcompaniesfromthesell-side(i.e.,themarketsandinvestmentbankingactivitiesofabroadsetofbankinggroups),buy-side(i.e.,wealthmanagers,assetmanagers,privateequityandhedgefunds)and?nancialmarketinfrastructure(i.e.,exchangesandassetservicing?rms).Wediscussedourobservationsandinsightswithvariousindustryleadersfocusingonthelikelydevelopmentofvaluepoolsgoingforward.Duringtheseconversations,wealsovalidatedourthoughtsonthekeymanagementchallengesindicatedbyour?ndingsforeachsectoroftheindustry.Inouranalysis,wefocusedonexploringtheunderlyingpro?tdynamicsend-to-endacrossallcapitalmarketssectors.ThescopeincludedtheCapitalMarketsVision20257IntroductionSell-SideBuy-SideMarketInfrastructureConclusionIntroductionSell-SideBuy-SideMarketInfrastructureConclusionFigure2:EconomicperformanceofIBGMbusinessesglobally,2020Inassessingthefutureofinvestmentbanking,it’simportanttostressthattherewillalwaysbeaneedforthefundamentalroleplayedbythesector:intermediatingbetweencorporatesandinvestors.30%20%10%0%However,it’sequallyclearthatdisintermediationincapitalmarketswillnotgoaway.So,thequestionforinvestmentbanksisnotwhethertherewillstillbearoleforthemin2025,butwhat

thatrolewilllooklike—andhowitwilldifferfromtoday?And,evenmoreinterestingly,whatisonthehorizonbeyond2025?-10%-20%-30%Theremarkablestrengthofcapitalmarketsrevenuesin2020hasbroughtthesectorsomerespite.Webelievethecurrentsituation—with2020resultsshowingpre-taxpro?tsbeingupbyover$10billionforthetopbusinesses—offerstheindustrytheopportunityto?nallygraspthenettleintermsofrestructuring.Itisvitalthatthesectornowavoidsareturntothedecade-longmalaisethatfollowedthe?nancialcrisis.0510152025303540Revenue(US$Billions)Top16InvestmentBanksandCIBsOtherInvestmentBanksandCIBsBubblesizeproportionaltocapitalCapitalMarketsVision20259IntroductionSell-SideBuy-SideMarketInfrastructureConclusionToachievethis,weseethreeavenuesformanagementteamstopursueinthenextfewyears:?x,focusandengage.Theseinvolve,respectively,makingrenewedeffortstoinvestrecentgainsinbendingthecostcurve;focusingmorecloselyonareasofexpertiseandadvantage;andengagingmoreholisticallywithclients.Whilethesethreestrandsofactivitywilllikelybetheprioritiesformanysell-sideplayersintheyearsto2025,anystrategicdiscussionwouldalsohavetotakeintoaccountalonger-termvisionoftheglobalmarketsthemselvesandpotentialdevelopmentswithinthem.CapitalMarketsVision202510IntroductionSell-SideBuy-SideMarketInfrastructureConclusionInvestmentbankingtoday:Seekingtorecoverfroma“l(fā)ostdecade”SincetheonsetoftheGlobalFinancialCrisis,theinvestmentbankingindustryingeneralhasstruggledtogeneratemeaningfulrevenuegrowth.Aggregaterevenuesforthetop16investmentbankshavefallenfromapproximately$286billionin2010tonearer$267billionin2019—anaverageyear-on-yeardeclineof1%(see?gure3).In2020,theindustrysawrevenuesofover$285billion—roughlybacktotheheydayofadecadeago.Wedonotbelievethisissomesecularreversion.Itismorearesponsetothepandemicanddoesnotfundamentallyaltertheoveralldirectionoftravelfortheindustry.CapitalMarketsVision202511IntroductionSell-SideBuy-SideMarketInfrastructureConclusionThissteadyslideinrevenuesuntil2019isrootedinseveralfactors.Theseincludeashiftingregulatorylandscape,fast-evolvingcustomerbehaviorsandexpectations,reducedvolumes,increasedcompetition,lowinterestratesandfallingmargins,alongwithliquiditystresses.Figure3:Investmentbanks’aggregaterevenueperformance,2010-2020Revenue(US$Millions)300,000250,000200,000150,000100,00050,0000Amoredetailedbreakdownshowsthatinvestmentbanks’corerevenues(de?nedasFICC,equities,corporateadvisory,andequityanddebtcapitalmarketsbusinesses)sufferedthemost,droppinganaverageof3%ayear.Inresponse,?rmshavegrownrevenuesinotherareas.Forsomebanks,theseeffortshaveincludedseekingsynergiesbymovingbusinesslinesfromtheircorporatebankingorprivatebankingandwealthmanagementbusinessesclosertotheinvestmentbank.Othershavepursuednewactivities,20102011201220132014201520162017201820192020CorerevenuesOtherexpandingintoareasliketrade?nance,securitiesservicesandtransactionbanking.Somehavemovedtowardretaildepositsandloans.CapitalMarketsVision202512IntroductionSell-SideBuy-SideMarketInfrastructureConclusionWhilesuchinitiativeshaveyieldedsomesuccessintermsofrevenues,twothingsremainclear:Figure4:Globalinvestmentbanks’RoE2010-2020–topnine,andexcludingthetop?veUSbanks?First,thebeatingheartoftheinvestmentbankingbusinesshasseenprofoundchangeoverthepastdecade.12%10%8%?Second,withinthatcore,returnsremaininadequate.6%Evenwhenwestripoutthesmallerplayersandlookonlyatthetopnineglobalinvestmentbanks,groupreturnsonequityhavealmostconsistentlyfailedtobeat?rms’costofequitycapital,which—forthispaper—weassumetobe10%.Thepicturebecomesgloomierstillifthe?vebiggestUSinvestmentbanksareexcluded(see?gure4).4%2%0%-2%-4%20102011201220132014201520162017201820192020Top9investmentbanksExcl.thetop5USinvestmentbanksCapitalMarketsVision202513IntroductionSell-SideBuy-SideMarketInfrastructureConclusionStructuralfactorsgiveUSbanksanedgeTheglaringdisparitybetweenthe(largelyUS-based)bulgebracketbanksandtheirpeergroupre?ectsseveralfactors.However,anotherfactorthatmaybeequallyasimportantisthelevelofreturnsfromthenon-capitalmarketselementsofthetopnineglobalinvestmentbanks’businessportfolios.Herethehigherreturnsavailablein,forexample,theUS’svibrantretailandcommercialbankingsegmentgivetheUSbanksasigni?cantadvantage,as?gure5shows—atleastuntil2020.First,theUSsell-sideisalmostcertainlymorepro?tablefromastructuralperspective.Beinglocatedintheworld’slargestanddeepestcapitalmarkethashelpedtobolstertheUSplayers’revenue?ows—ashasthespeedofregulatoryaction,write-downsandrecapitalizationsintheUSfollowingthe?nancialcrisis.TherapidreversalintheprevailinglevelofUSinterestrateshasmeaningfullyimpactedtheseretailandcommercialbankingbusinesses.However,astheUSyieldshifteddownaggressivelyasthepandemicsetin,thelongendhastwistedmorepositively,implyinganexpectationofrisingratesby2025.Thisshouldre-establishthatreturnpremiumofthelargeUSgroupsfromtheirmainstreambankingbusinesses.FurtherfactorsfavoringUSinvestmentbanksincludetheeasingoftheirregulatoryburdeninrecentyearstogetherwithmoreproactivecentralbankaction,astrongerunderlyingeconomyandtheabsenceofasovereigndebtcrisis.CapitalMarketsVision202514IntroductionSell-SideBuy-SideMarketInfrastructureConclusionInadditiontosuchstructuralfactors,webelievethatUSinvestmentbanks’judiciousinvestmentsintechnology,especiallyinrecentyears,havealsobeeninstrumentalindrivingtheirstrongerperformance.Thatsaid,theseinvestmentswouldclearlyhavebeenenabled—atleastinpart—bybetterunderlyingeconomicsoftheirexistingbusinesses.Figure5:ReturnsonequityonUSandEuropeaninvestmentbanks’non-capitalmarketsactivities,2010-202015%10%5%Overall,it’sclearthattheplaying?eldisessentiallyskewed,andEuropeanbankswouldneedtoadoptmoreagileand?exiblebusinessmodelstogenerateUS-styleinvestmentbankingreturns.0%-5%-10%2010USIBs2011201220132014201520162017201820192020EuropeanIBsCapitalMarketsVision202515IntroductionSell-SideBuy-SideMarketInfrastructureConclusionTheinvestmentbankingvisionfor2025:PeopleandtechnologyaskeyassetsAsmentionedearlier,therewillalwaysbeaneedforinvestmentbanks’fundamentalroleofintermediatingbetweencorporatesandinvestors.Howevercapitalmarketshasevolvedrapidlyintoavery“tech-heavy”industry,withnewmethodsofinteracting,trading,advisingandoperatinginvariablybeingtechnology-led.Thishascreatedanentrybarrierbasedondepthof?nancialandtechnicalresources—which?rmsalreadysufferingfrominadequatereturnshavestruggledtomeet.CapitalMarketsVision202516IntroductionSell-SideBuy-SideMarketInfrastructureConclusionOutsideofthebulgebracket?rmsHowever,thereareinterestingnicheexamplesofsuccessfulinvestmentbanks.Someoftheseoutperformersfocusonaparticulargeography,whileothersspecializeinaspeci?csuiteofproducts.Whilesomeobserversmayfeelthiskindofnichefocuslimitsabank’sgrowthExamplesinclude:leveraginghugescale,therealityisthattoomanyinvestmentbanksmaystillbeattemptingtopursueglobal“across-the-waterfront”strategiesaimedatplayingineverymarketsegment.Inmanycasesthebanksapplyingsuchstrategiesmightbefailingtodelivervalueorimprovereturnswhilealsoappearingtoreinventthemselvescontinuously.?Post-tradeprocessesremainheavilyintermediated,withpoor-qualityupstreamdatacreatinganeedforconstanthumaninterventionsdownstream.aspirations,webelievethatithashelpedthose?rmstoenhanceshareholdervalueovertime.?Ongoingchangesinregulationandtheriskof?nesandotherregulatorysanctionsmeanfrontof?cestaffarestillhavingtofocustoomuchtimeandeffortonnon-revenuegeneratingtasks.Despitesuchsuccessstories,thefactremainsthatsigni?cantcostchallengesneedtobeaddressedininvestmentbanking.Manyfunctionsstillrequirehigh-costhumaninterventionsduetoregulatorycomplexity,legacytechnology,challengesarounddataandthepersistenceofexcessivelymanualprocesses.?Siloedfunctionscontinuetogenerateduplicatedandevencircularprocesses.?Knowyourclient(KYC)andanti-moneylaundering(AML)requirementshavedrivenupthecostsofonboardingnewcustomersandmaintainingtheclientbase.CapitalMarketsVision202517IntroductionSell-SideBuy-SideMarketInfrastructureConclusionThedisintermediationconundrumAspreviouslypointedout,investmentbanksactbothasanintermediaryandadvisor.Thelatterroleisalmostentirelyahumancapitalexercise—whichmakesitadouble-edgedsword.Twenty-?veyearsago,beinganintermediarymeanthavingcapital.Todayitisaboutcapitalandcapability,bothinpeopleandtechnology.Inthefuture,itwillbeaboutthelattercomponentsfarmorethanthe?rst.Ontheonehand,thecostbasecanbe?exedandcapitalconsumptionisminimal,meaningthisbusinesscanbeconsistentlypro?tableandcloselycontrolled.Ontheother,itisdif?culttomaintainwhatWarrenBuffetwouldcalla“moat”asthekeyasset—people—couldleaveanydayandevensetupanewbusinessindependently.Whatkeepsthesehumanassetsin-houseisthetheorythatthebalancesheetincreasestheoverallsizeoftheprize.Andthisisaproblem.assetsbecometokenized—drivingcapitalmarketstowardsinstant,globalandreliablesettlement—therequirementforintermediariesascapitalprovidersisexpectedtodecline.Thereareprecedentsinotherindustries.TakeAmazon,whichbeganbysellingitsownproductsandisnowreportedtosellmoreofotherpeople’smerchandisethanitsown.4Sotherealvalueintheplatformmodelliesinthetechplatformitselfandtheful?lmentinfrastructureitprovides.Partlyasaresult,weseethisroleofintermediaryundergoingfundamentalchangeinthelongrun.Today,capitalallocatedtosecondarytradingbusinessesisalreadybeingdisintermediatedbytechnologyamongthemostliquidinstruments.Atthesametime,directandSPAC(specialpurposeacquisitioncompany)listingsareloweringcapitalrequirementswithinprimarybusinesses.AsmoreSimilarly,tokenizationincapitalmarketsmeanstheful?lmentinfrastructurelayerbecomesvanishinglysmallandthetechnologyplatformbecomesparamount,alongsidetheadvisorycapability.Weseethisshiftimprovingef?ciencyacrossglobalmarketsand,forthe(few)trulytech-ledcompanies,creatingmeaningfullymorepro?tablebusinesses.CapitalMarketsVision202518IntroductionSell-SideBuy-SideMarketInfrastructureConclusionBecomingagloballyconnectedbusinessImagineaworldwhereeverycapitalprovider(saverorinvestor)islinkedtoeverycapitaluser(governmentorcorporate)viaoneplatform(orperhapsmorethanone),andmovingcapitalaroundisaseasyassendingamessageonWhatsApp.Insuchaworld,regulatorswouldhavetoworkextremelyhardtopolicecomplianceandmaintaininvestorprotection.Butforcapitalproviders,theeffectofsuchanenvironmentwouldbetocreateacriticalmassornetworkeffectbusiness.Andforinvestmentbankstoadapttoit,theywouldneedtheabilitytomovefastwhiledealingwithregulatoryarbitrage,changingregulationsandshiftingdemandsonbothsidesofthecapitalequation.Afurtherpossibilityisthatoneormoreplayersmighttakeovermuchofthecapitalmarkets“highstreet”astheclient-facingfrontend,withotherbanks?ndingaroleinshapinginnovativeproducts,bringingmorereticentorharder-to-accessclientstothemarket,orofferingvalue-addservicesaroundthisecosystem.However,regardlessofwhatthefutureholds,webelievethatinvestmentbanksshouldembracemoreradicalactiontoday.Actionthatismorestrategicthantactical,moremacrothanspeci?c,andwhichembedstechnologydeeplyintothefabricofthebusiness.CapitalMarketsVision202519IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAnactionagendaforinvestmentbankingCOVID-19hasbroughtdevastatingimpactsbothforhumanityandarangeofindustries.However,investmentbankinghasbene?tedfromtheongoingvolatility,highervolumesandactivitylevelsintheprimarymarkets.Revenuesacrossmanyoftheindustry’smajorbusinesslinesarenowmeaningfullyhigherthanayearagoandreturnshaveimprovedsigni?cantly.Coresell-siderevenuesin2020havecomeoutalmost25%,ornearly$45billion,higherthanin2019.Butwewouldaddanimportantpointhere.Wedonotfeelthisisanewtrajectory:ratesaregoingtobelowforalotlonger,activitylevelsarelikelytoslipbackinlinewith(lower)globalGDP,andmuchofthepull-forwardofcorporatere?nancingsappearsunlikelytorecur.Inshort,thisisawelcomeperiodofrespiteratherthanastructuralchangeofdirection.CapitalMarketsVision202520IntroductionSell-SideBuy-SideMarketInfrastructureConclusionFigure6:Investmentbanks’averagecost-incomeratio,2010-2020Manyinvestmentbankshavebeenrestructuringandcostcuttingsincethe?nancialcrisis.However,evenabasicanalysisoftheinterplaybetweencostsandrevenuesshowsthattheseactionshaveachievedonlylimitedsuccess.At61%,aggregateef?ciency(cost-income)ratioswereroughlythesamein2020asnearlyadecadeearlier(see?gure6).And,while61%remainstheaverage,the?guresvarywidelybetweenindividualinstitutions.Whilethe?velargestinvestmentbanksareachievingcost-incomeratiosbelow65%,othersare?ndingithardertomaintainef?ciencyatanywhereclosetothatlevel,reportingcost-incomeratiosofupto100%.70%60%50%40%30%20%10%0%Withtheincrementalpre-taxpro?tgainofover$10billionin2020comparedto2019,thispresentsagoldenopportunitytoinvest,reshapeandretool.Butwhatshould?rmsbedoing?20102011201220132014201520162017201820192020CapitalMarketsVision202521IntroductionSell-SideBuy-SideMarketInfrastructureConclusionTheshortterm:BendingthecostcurveThisopportunityshouldnotbewasted—andtoseizeit,incrementalchangewilllikelynotbeenough.First,investmentbanksshouldaimtoreducecostsinanintelligentwayacrossthebusiness.Thisisaboutbendingthecostcurvepermanentlybyoptimizingthecostbaseinthreemaindimensions:RebuildingaroundthecoreFutureofworkRemovingprocessingcostsfromthefrontof?ce,andreshapingsupportfunctionsusingcognitiveautomation,complianceandanti-?nancialcrime(AFC)innovation,liquidworkforcemodels,end-to-endplatformdesign,widercostmutualizationandassettokenization.2020hasshownusthattheworkforcecan?ndnewwaystoworkthatcangenerateproductivitygains.Technologyinvestments(suchasscreensandconnectivity)wouldbeneeded,alongwithnewwaysofsupportingthementalhealthoftheworkforce.Butwebelievethesavingstobemadeinrealestate—nottomentionfrommovingfunctionstolower-costlocations—couldbesigni?cant.AnewtechnologylandscapeBeginningwithenvisioninganewcloudarchitecture,andthenmovingbeyondIaaStowardamoreintegralimplementationofthepromiseofanalytics,arti?cialintelligence(AI)andmachinelearning(ML),nativesecuritylayers(SaaS)andafullDevOpsenvironment,bringingthe?exibilitythatthesetechnologiescanprovidetohelpkeeppacewithclientdemands.CapitalMarketsVision202522IntroductionSell-SideBuy-SideMarketInfrastructureConclus