2025年资本市场愿景（英）-81正式版

TowardstheMarketsofTomorrowCapitalMarketsVision2025IntroductionSell-SideBuy-SideMarketInfrastructureConclusionIntroduction38FinancialMarketInfrastructure:ExchangesandAssetServicing58Sell-Side:InvestmentBankingExecutivesummary5861666871Exchangestoday:Fightingforlistingstoachievea“dominoeffect”onrevenuesTheexchangesvisionfor2025:ThefullyautomateddigitalexchangeofthefutureAnactionagendaforexchangesExecutivesummary811Investmentbankingtoday:Seekingtorecoverfroma“lostdecade”Theinvestmentbankingvisionfor2025:PeopleandtechnologyaskeyassetsAnactionagendaforinvestmentbanking1620Assetservicingtoday:Astrongfocusonpost-tradeservicesTheassetservicingvisionfor2025:AdigitalindustryAnactionagendaforassetservicingfirms7476Buy-Side:Asset&WealthManagementandPrivateMarkets26Conclusion78Executivesummary26323538404447495356Assetmanagementtoday:ThepressuretotransformTheassetmanagementvisionfor2025:AnewplaybookinactionAnactionagendaforassetmanagersWealthmanagementtoday:Astoryofclient-driventransformationThewealthmanagementvisionfor2025:BusinessmodelswiththeclientatthecenterAnactionagendaforwealthmanagersPrivatemarketstoday:Theindustry’sprofitengineTheprivatemarketsvisionfor2025:CreatingthedigitallyenabledfirmAnactionagendaforprivatemarketsfirmsCapitalMarketsVision20252IntroductionSell-SideBuy-SideMarketInfrastructureConclusionIntroductionAnindustryfacingarareopportunityTheglobalcapitalmarketsindustrysawmostlylimitedrevenuegrowthintheyearsleadingupto2020.1Atthesametime,firms’economicreturnsvariedwidely,withmanyindustryplayersfailingtobeatastandardizedcostofequitycapital.Combinedwithpersistentstructuralcostissues,thesecharacteristicsallsuggestedanindustryinthelatterphasesofitseconomiccycle.CapitalMarketsVision20253IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAfocusonrealizingdigitalvalueFromtheheavilyskewedcapitalmarketsindustryoftoday…ButthenCOVID-19camealonganddefinedtheindustry’slandscapein2020.Andwhilethepandemichashadaterribleimpactonhumanityandmanysectorsoftheeconomy,ithasalsobroughtthesell-sideandtheexchangesanunexpectedrespitewithrevenuesatnear-recordlevels.Thebuy-sidesawstronggrowthinassetsundermanagementandhighinvestorinterest.Overall,capitalmarketsindustryrevenueswerestableinlightofunprecedentedeconomictimesandshort-termprofitabilitywasstrongformanyfirmsin2020.InourCapitalMarketsVision2022reportpublishedthreeyearsago,weidentifiedtheprimarydriversofindustrydisruptionincapitalmarketsasbeingtechnology-ledinnovationandthecreationofnewdigitalvaluechainsacrosstheindustry.2Todaythesetrendsremainfundamentallyconsistent.So,whathas

changed?In2020,thecapitalmarketsindustryasawholegeneratedsome$1.12trillioninrevenuesandaround$119billionofeconomicprofit.However,asectoranalysisrevealsthatthedistributionofthisvaluecreationwasheavilyskewed.Intheinterveningthreeyears,wesawevenmoreadvancesintechnologyandprofoundshiftsinmindsetsthanpredicted—inpartforcedbytheglobalpandemic.Inourview,boththescopeforchangeandthewillingnesstoexecuteithaveincreasedmarkedlyintheindustry,therebyredefiningtheartofthepossible.Webelievefirmsshouldcontinuetheirdrivetounlockgreaterdigitalvalueand,asCOVID-19’simpactgraduallyrecedes,capitalizeonauniqueopportunityforcreatingthecapitalmarketsoftomorrow.Thebuy-sidegenerated65%ofindustryrevenuesandamassive90%oftheeconomicprofit(seefigure1).Thisdominanceispartlyduetothebuy-side’s“capitallight”businessmodel.Themore“capitalregulated”sell-sideandmarketinfrastructurebusinessesshared35%ofthetotalrevenuepoolincapitalmarketsbetweenthembutgeneratedjust10%oftheeconomicprofit.Webelievethattheindustry’spandemic-drivenreboundisagoldenopportunitytoaccelerateinvestmentsinnewtechnologiesandnewwaysofworking.Fromcloudtoartificialintelligence,leadersshouldseizethechancetopreparetheirbusinessesforthenextwaveofdisruptionandstriveforlongertermsuccesstoday.CapitalMarketsVision20254IntroductionSell-SideBuy-SideMarketInfrastructureConclusionThisgapissomewhatduetotheseismicshiftsintheregulationofbanks’capitalbasessincethefinancialcrisis.Figure1:Breakdownofcapitalmarketsindustryrevenuesbysector,2020US$Billions62However,thedisparityhascontinuedtowidenintheyearssinceourlastmajorreport.Backthen,figuresfor2017showedthesell-sideandmarketinfrastructurecompaniesaccountingfor13%ofeconomicprofit—asharethathasnowdroppedto10%.177305673Cost1,128189EquityCapitalCharge7216689Capitalreturnsaside,theindustryonanaggregatedlevelhasn’timprovedoverallefficiency.Ourcalculationsputtheaveragecost-incomeratioofcapitalmarketsfirmsat66.7%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,weseetherateofchangeintechnologyevenfurtheracceleratingthefluxincapitalmarketsasweprogresstowards2025.Webelievethattradingvolumeswillcontinuetoriseundertheimpactofincreasingglobalfinancialsophistication.Theadditionoftokenizationcouldalsoopenupnewavenuestoinvestandlendwhilereducingthecostsofdoingso.Thisrepresentsbothanopportunityandathreatfortheentirecapitalmarketsindustry.Asaresult,inourview,thebiggestchangestocometothecapitalmarketssectorsinthenextphaseoftheindustrywillbeasfollows:organizationsthroughtoday’senvironmentandsettingthemupforsuccessisnevergoingtobeeasy—andit’shardergivenafutureinwhichdisruptionwilllikelyaccelerate.Andwhilenosingleplanwillberightforeveryfirm,webelievethatthereisacommonsetoftoolstobeginthejourneytobeinganindustryleaderincapitalmarketsby2025.Eachsectorintheindustryhasitsownindividualchallengesandopportunities,andwewillstartbylookingintothespecificsofeachsectorinthenextchapters.Sell-sidefirmswillacceleratetheirstrategictransformationprograms,bothintermsofchangingbusinessscopesandperimetersandalsoinreshapingthecostbasetodriveconsistentlyhigherprofitability.Buy-sidefirmsareexpectedtoincreasinglybecome“digitallynative”—meaningtheywouldinfusetechnologyacrosstheiroperatingmodels,includingintotheirinvestmentprocess,clientinteractionsandorganizationalculture.Also,theperceptionsofbuy-sidefirmswillbegintoshiftfrombeingalphageneratorstobeingholisticstewardsofcapital,focusingonreturnsasjustoneofmanymetricsacrosstheenvironmental,socialandgovernance(ESG)spectrum.Thissameethicalcompassshiftwilllikelyalsobecomepervasiveacrossthewidercapitalmarketsecosystem.Financialmarketinfrastructureplayerswillfindcompetitionintensifyingasexchangesandassetservicingfirms’clientsstarttodisintermediateandcompetewiththem.TheMembersExchange(MEMX)isacaseinpoint,butcompetitioninareasfrommarketdatatosettlementandcustodycouldalsoincrease.3CapitalMarketsVision20256IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAboutourmethodologyIndevelopingourvisionforcapitalmarketsin2025,weanalyzedpubliclyavailablefinancialinformationfromover140capitalmarketsfirmstodefineaclearviewofprofitabilityattheindustryandsector-level.Weexploredtrendsovertimeusing2020businessfinancialresultsasabaseline.Wecalculatedeconomicprofitasayardstick,deductingfromrevenues:creditlosses,fulloperatingcosts,taxesandthecostofequitycapital.Whilethecostofequitycapitalwilldifferbycompany,sectorandregion,tofacilitatecomparisonsweappliedastandardizedrate(10%)acrossourresearch,generatinganabsoluteeconomicprofitfigureforthecapitalmarketsindustryasawhole,eachsectorandtheunderlyingcompaniesinvolved.global,leading,publicly-tradedcompaniesfromthesell-side(i.e.,themarketsandinvestmentbankingactivitiesofabroadsetofbankinggroups),buy-side(i.e.,wealthmanagers,assetmanagers,privateequityandhedgefunds)andfinancialmarketinfrastructure(i.e.,exchangesandassetservicingfirms).Wediscussedourobservationsandinsightswithvariousindustryleadersfocusingonthelikelydevelopmentofvaluepoolsgoingforward.Duringtheseconversations,wealsovalidatedourthoughtsonthekeymanagementchallengesindicatedbyourfindingsforeachsectoroftheindustry.Inouranalysis,wefocusedonexploringtheunderlyingprofitdynamicsend-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-taxprofitsbeingupbyover$10billionforthetopbusinesses—offerstheindustrytheopportunitytofinallygraspthenettleintermsofrestructuring.Itisvitalthatthesectornowavoidsareturntothedecade-longmalaisethatfollowedthefinancialcrisis.0510152025303540Revenue(US$Billions)Top16InvestmentBanksandCIBsOtherInvestmentBanksandCIBsBubblesizeproportionaltocapitalCapitalMarketsVision20259IntroductionSell-SideBuy-SideMarketInfrastructureConclusionToachievethis,weseethreeavenuesformanagementteamstopursueinthenextfewyears:fix,focusandengage.Theseinvolve,respectively,makingrenewedeffortstoinvestrecentgainsinbendingthecostcurve;focusingmorecloselyonareasofexpertiseandadvantage;andengagingmoreholisticallywithclients.Whilethesethreestrandsofactivitywilllikelybetheprioritiesformanysell-sideplayersintheyearsto2025,anystrategicdiscussionwouldalsohavetotakeintoaccountalonger-termvisionoftheglobalmarketsthemselvesandpotentialdevelopmentswithinthem.CapitalMarketsVision202510IntroductionSell-SideBuy-SideMarketInfrastructureConclusionInvestmentbankingtoday:Seekingtorecoverfroma“lostdecade”SincetheonsetoftheGlobalFinancialCrisis,theinvestmentbankingindustryingeneralhasstruggledtogeneratemeaningfulrevenuegrowth.Aggregaterevenuesforthetop16investmentbankshavefallenfromapproximately$286billionin2010tonearer$267billionin2019—anaverageyear-on-yeardeclineof1%(seefigure3).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(definedasFICC,equities,corporateadvisory,andequityanddebtcapitalmarketsbusinesses)sufferedthemost,droppinganaverageof3%ayear.Inresponse,firmshavegrownrevenuesinotherareas.Forsomebanks,theseeffortshaveincludedseekingsynergiesbymovingbusinesslinesfromtheircorporatebankingorprivatebankingandwealthmanagementbusinessesclosertotheinvestmentbank.Othershavepursuednewactivities,20102011201220132014201520162017201820192020CorerevenuesOtherexpandingintoareasliketradefinance,securitiesservicesandtransactionbanking.Somehavemovedtowardretaildepositsandloans.CapitalMarketsVision202512IntroductionSell-SideBuy-SideMarketInfrastructureConclusionWhilesuchinitiativeshaveyieldedsomesuccessintermsofrevenues,twothingsremainclear:Figure4:Globalinvestmentbanks’RoE2010-2020–topnine,andexcludingthetopfiveUSbanks•First,thebeatingheartoftheinvestmentbankingbusinesshasseenprofoundchangeoverthepastdecade.12%10%8%•Second,withinthatcore,returnsremaininadequate.6%Evenwhenwestripoutthesmallerplayersandlookonlyatthetopnineglobalinvestmentbanks,groupreturnsonequityhavealmostconsistentlyfailedtobeatfirms’costofequitycapital,which—forthispaper—weassumetobe10%.ThepicturebecomesgloomierstillifthefivebiggestUSinvestmentbanksareexcluded(seefigure4).4%2%0%-2%-4%20102011201220132014201520162017201820192020Top9investmentbanksExcl.thetop5USinvestmentbanksCapitalMarketsVision202513IntroductionSell-SideBuy-SideMarketInfrastructureConclusionStructuralfactorsgiveUSbanksanedgeTheglaringdisparitybetweenthe(largelyUS-based)bulgebracketbanksandtheirpeergroupreflectsseveralfactors.However,anotherfactorthatmaybeequallyasimportantisthelevelofreturnsfromthenon-capitalmarketselementsofthetopnineglobalinvestmentbanks’businessportfolios.Herethehigherreturnsavailablein,forexample,theUS’svibrantretailandcommercialbankingsegmentgivetheUSbanksasignificantadvantage,asfigure5shows—atleastuntil2020.First,theUSsell-sideisalmostcertainlymoreprofitablefromastructuralperspective.Beinglocatedintheworld’slargestanddeepestcapitalmarkethashelpedtobolstertheUSplayers’revenueflows—ashasthespeedofregulatoryaction,write-downsandrecapitalizationsintheUSfollowingthefinancialcrisis.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’sclearthattheplayingfieldisessentiallyskewed,andEuropeanbankswouldneedtoadoptmoreagileandflexiblebusinessmodelstogenerateUS-styleinvestmentbankingreturns.0%-5%-10%2010USIBs2011201220132014201520162017201820192020EuropeanIBsCapitalMarketsVision202515IntroductionSell-SideBuy-SideMarketInfrastructureConclusionTheinvestmentbankingvisionfor2025:PeopleandtechnologyaskeyassetsAsmentionedearlier,therewillalwaysbeaneedforinvestmentbanks’fundamentalroleofintermediatingbetweencorporatesandinvestors.Howevercapitalmarketshasevolvedrapidlyintoavery“tech-heavy”industry,withnewmethodsofinteracting,trading,advisingandoperatinginvariablybeingtechnology-led.Thishascreatedanentrybarrierbasedondepthoffinancialandtechnicalresources—whichfirmsalreadysufferingfrominadequatereturnshavestruggledtomeet.CapitalMarketsVision202516IntroductionSell-SideBuy-SideMarketInfrastructureConclusionOutsideofthebulgebracketfirmsHowever,thereareinterestingnicheexamplesofsuccessfulinvestmentbanks.Someoftheseoutperformersfocusonaparticulargeography,whileothersspecializeinaspecificsuiteofproducts.Whilesomeobserversmayfeelthiskindofnichefocuslimitsabank’sgrowthExamplesinclude:leveraginghugescale,therealityisthattoomanyinvestmentbanksmaystillbeattemptingtopursueglobal“across-the-waterfront”strategiesaimedatplayingineverymarketsegment.Inmanycasesthebanksapplyingsuchstrategiesmightbefailingtodelivervalueorimprovereturnswhilealsoappearingtoreinventthemselvescontinuously.•Post-tradeprocessesremainheavilyintermediated,withpoor-qualityupstreamdatacreatinganeedforconstanthumaninterventionsdownstream.aspirations,webelievethatithashelpedthosefirmstoenhanceshareholdervalueovertime.•Ongoingchangesinregulationandtheriskoffinesandotherregulatorysanctionsmeanfrontofficestaffarestillhavingtofocustoomuchtimeandeffortonnon-revenuegeneratingtasks.Despitesuchsuccessstories,thefactremainsthatsignificantcostchallengesneedtobeaddressedininvestmentbanking.Manyfunctionsstillrequirehigh-costhumaninterventionsduetoregulatorycomplexity,legacytechnology,challengesarounddataandthepersistenceofexcessivelymanualprocesses.•Siloedfunctionscontinuetogenerateduplicatedandevencircularprocesses.•Knowyourclient(KYC)andanti-moneylaundering(AML)requirementshavedrivenupthecostsofonboardingnewcustomersandmaintainingtheclientbase.CapitalMarketsVision202517IntroductionSell-SideBuy-SideMarketInfrastructureConclusionThedisintermediationconundrumAspreviouslypointedout,investmentbanksactbothasanintermediaryandadvisor.Thelatterroleisalmostentirelyahumancapitalexercise—whichmakesitadouble-edgedsword.Twenty-fiveyearsago,beinganintermediarymeanthavingcapital.Todayitisaboutcapitalandcapability,bothinpeopleandtechnology.Inthefuture,itwillbeaboutthelattercomponentsfarmorethanthefirst.Ontheonehand,thecostbasecanbeflexedandcapitalconsumptionisminimal,meaningthisbusinesscanbeconsistentlyprofitableandcloselycontrolled.Ontheother,itisdifficulttomaintainwhatWarrenBuffetwouldcalla“moat”asthekeyasset—people—couldleaveanydayandevensetupanewbusinessindependently.Whatkeepsthesehumanassetsin-houseisthetheorythatthebalancesheetincreasestheoverallsizeoftheprize.Andthisisaproblem.assetsbecometokenized—drivingcapitalmarketstowardsinstant,globalandreliablesettlement—therequirementforintermediariesascapitalprovidersisexpectedtodecline.Thereareprecedentsinotherindustries.TakeAmazon,whichbeganbysellingitsownproductsandisnowreportedtosellmoreofotherpeople’smerchandisethanitsown.4Sotherealvalueintheplatformmodelliesinthetechplatformitselfandthefulfilmentinfrastructureitprovides.Partlyasaresult,weseethisroleofintermediaryundergoingfundamentalchangeinthelongrun.Today,capitalallocatedtosecondarytradingbusinessesisalreadybeingdisintermediatedbytechnologyamongthemostliquidinstruments.Atthesametime,directandSPAC(specialpurposeacquisitioncompany)listingsareloweringcapitalrequirementswithinprimarybusinesses.AsmoreSimilarly,tokenizationincapitalmarketsmeansthefulfilmentinfrastructurelayerbecomesvanishinglysmallandthetechnologyplatformbecomesparamount,alongsidetheadvisorycapability.Weseethisshiftimprovingefficiencyacrossglobalmarketsand,forthe(few)trulytech-ledcompanies,creatingmeaningfullymoreprofitablebusinesses.CapitalMarketsVision202518IntroductionSell-SideBuy-SideMarketInfrastructureConclusionBecomingagloballyconnectedbusinessImagineaworldwhereeverycapitalprovider(saverorinvestor)islinkedtoeverycapitaluser(governmentorcorporate)viaoneplatform(orperhapsmorethanone),andmovingcapitalaroundisaseasyassendingamessageonWhatsApp.Insuchaworld,regulatorswouldhavetoworkextremelyhardtopolicecomplianceandmaintaininvestorprotection.Butforcapitalproviders,theeffectofsuchanenvironmentwouldbetocreateacriticalmassornetworkeffectbusiness.Andforinvestmentbankstoadapttoit,theywouldneedtheabilitytomovefastwhiledealingwithregulatoryarbitrage,changingregulationsandshiftingdemandsonbothsidesofthecapitalequation.Afurtherpossibilityisthatoneormoreplayersmighttakeovermuchofthecapitalmarkets“highstreet”astheclient-facingfrontend,withotherbanksfindingaroleinshapinginnovativeproducts,bringingmorereticentorharder-to-accessclientstothemarket,orofferingvalue-addservicesaroundthisecosystem.However,regardlessofwhatthefutureholds,webelievethatinvestmentbanksshouldembracemoreradicalactiontoday.Actionthatismorestrategicthantactical,moremacrothanspecific,andwhichembedstechnologydeeplyintothefabricofthebusiness.CapitalMarketsVision202519IntroductionSell-SideBuy-SideMarketInfrastructureConclusionAnactionagendaforinvestmentbankingCOVID-19hasbroughtdevastatingimpactsbothforhumanityandarangeofindustries.However,investmentbankinghasbenefitedfromtheongoingvolatility,highervolumesandactivitylevelsintheprimarymarkets.Revenuesacrossmanyoftheindustry’smajorbusinesslinesarenowmeaningfullyhigherthanayearagoandreturnshaveimprovedsignificantly.Coresell-siderevenuesin2020havecomeoutalmost25%,ornearly$45billion,higherthanin2019.Butwewouldaddanimportantpointhere.Wedonotfeelthisisanewtrajectory:ratesaregoingtobelowforalotlonger,activitylevelsarelikelytoslipbackinlinewith(lower)globalGDP,andmuchofthepull-forwardofcorporaterefinancingsappearsunlikelytorecur.Inshort,thisisawelcomeperiodofrespiteratherthanastructuralchangeofdirection.CapitalMarketsVision202520IntroductionSell-SideBuy-SideMarketInfrastructureConclusionFigure6:Investmentbanks’averagecost-incomeratio,2010-2020Manyinvestmentbankshavebeenrestructuringandcostcuttingsincethefinancialcrisis.However,evenabasicanalysisoftheinterplaybetweencostsandrevenuesshowsthattheseactionshaveachievedonlylimitedsuccess.At61%,aggregateefficiency(cost-income)ratioswereroughlythesamein2020asnearlyadecadeearlier(seefigure6).And,while61%remainstheaverage,thefiguresvarywidelybetweenindividualinstitutions.Whilethefivelargestinvestmentbanksareachievingcost-incomeratiosbelow65%,othersarefindingithardertomaintainefficiencyatanywhereclosetothatlevel,reportingcost-incomeratiosofupto100%.70%60%50%40%30%20%10%0%Withtheincrementalpre-taxprofitgainofover$10billionin2020comparedto2019,thispresentsagoldenopportunitytoinvest,reshapeandretool.Butwhatshouldfirmsbedoing?20102011201220132014201520162017201820192020CapitalMarketsVision202521IntroductionSell-SideBuy-SideMarketInfrastructureConclusionTheshortterm:BendingthecostcurveThisopportunityshouldnotbewasted—andtoseizeit,incrementalchangewilllikelynotbeenough.First,investmentbanksshouldaimtoreducecostsinanintelligentwayacrossthebusiness.Thisisaboutbendingthecostcurvepermanentlybyoptimizingthecostbaseinthreemaindimensions:RebuildingaroundthecoreFutureofworkRemovingprocessingcostsfromthefrontoffice,andreshapingsupportfunctionsusingcognitiveautomation,complianceandanti-financialcrime(AFC)innovation,liquidworkforcemodels,end-to-endplatformdesign,widercostmutualizationandassettokenization.2020hasshownusthattheworkforcecanfindnewwaystoworkthatcangenerateproductivitygains.Technologyinvestments(suchasscreensandconnectivity)wouldbeneeded,alongwithnewwaysofsupportingthementalhealthoftheworkforce.Butwebelievethesavingstobemadeinrealestate—nottomentionfrommovingfunctionstolower-costlocations—couldbesignificant.AnewtechnologylandscapeBeginningwithenvisioninganewcloudarchitecture,andthenmovingbeyondIaaStowardamoreintegralimplementationofthepromiseofanalytics,artificialintelligence(AI)andmachinelearning(ML),nativesecuritylayers(SaaS)andafullDevOpsenvironment,bringingtheflexibilitythatthesetechnologiescanprovidetohelpkeeppacewithclientdemands.CapitalMarketsVision202522IntroductionSell-SideBuy-SideMarketInfrastructureConclus