Digital deals

Death of an Investment Banker

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Traditional investment banking centers such as Frankfurt are facing a new digital challenge.
  • Why it matters

    Why it matters

    Traditional investment banks are losing business to innovative new digital trading and investment platforms.

  • Facts

    Facts

    • In some markets, 95 percent of trading is already conducted electronically.
    • New digital platforms such as Edgefolio and Algomi are making trades more efficient and easier.
    • Established players such as Barclays are developing their own digital platforms to compete with the startups.
  • Audio

    Audio

  • Pdf

Think of it as a kind of LinkedIn for the financial industry. Hedge fund managers are able to quickly and selectively seek out investors through a specialized social media network. No need for a prime broker, the section of investment banks that traditionally handles the needs of hedge funds.

London-based Edgefolio, founded by Leo Gasteen, is part of a new frontier of digital innovation that is revolutionizing the financial industry. Mr. Gasteen developed the idea while working for a hedge fund in Norway, where he experienced first hand how painstaking the process of gathering funding could be.

Financial-technology firms, known as fintechs, are all the rage these days. These new digital players have already begun to make a significant mark in retail and commercial banking, bringing things like crowd-sourcing to the lending market, offering online payment options and acting increasingly as middle-men steering customers to banks with the best loan and account offers.

But they have struggled to break into the more complex world of investment banking. In the hedge fund sector, 10 percent of companies control 90 percent of the assets.

While startups like Edgefolio cannot yet compete with the established players, they are making inroads into the niches and on the fringes of the capital markets, according to Will Rhode of the research firm Boston Consulting Group.

Mr. Rhode, however, believes these startups are like trojan horses; once they have their foot in the door, they will inevitably start conquering larger shares of the market as their confidence grows and the technology becomes more sophisticated.

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