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Hedge fund trading volume jumps, makes comeback in fixed income - Greenwich Associates

Thursday, December 16, 2010
Opalesque Industry Update - The results of Greenwich Associates’ 2010 European Fixed Income Study show that following two years of crisis, hedge funds’ European fixed-income trading volume jumped 47% from 2009 to 2010.

As the need for investor liquidity abated and concerns about hedge funds as trading counterparties waned, hedge fund activity picked up. The jump in hedge fund trading volumes helped hedge funds increase their presence in European markets. In 2009, hedge funds generated 9% of total European fixed-income trading volume. In 2010 that share surged to 14%.

Expanding Presence in Credit Products and Government Bonds
Hedge funds are generating an even larger share of total trading volume in individual fixed-income products. For example, hedge funds have always been a major source of trading volume in emerging markets, and in 2010 they generated almost half of all emerging markets trading volume in Europe. Hedge funds also generated 46% of trading volume in European high-yield credit and 41% in leveraged loans. Hedge funds became much more active in investment grade credit last year. In 2009, they generated just 7% of total trading volume in investment grade credit. In 2010, that share jumped to 20%. From 2009 to 2010, hedge funds also accounted for an impressive 7% of overall trading volume in European government bonds.

“Overall, cash bonds made up a much bigger part of hedge fund trading volumes in 2010,” says Greenwich Associates consultant Peter D’Amario. “In 2009, hedge fund trading volume was made up of 64% derivatives and 35% cash bonds; this year, cash bonds made up 55% of hedge fund trading volumes.”

(press release)

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