Fri, Nov 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedge fund fixed-income trading jumped 36% from 2009 to 2010 - Greenwich study

Wednesday, August 11, 2010
Opalesque Industry Updates - Hedge funds are quickly regaining some of the clout they lost in U.S. fixed-income markets during the market meltdown.

The results of Greenwich Associates’ 2010 U.S. Fixed-Income Investors Study reveal that while overall U.S. fixed-income trading volume declined from 2009 to 2010, hedge fund trading volumes jumped some 36% among a matched sample of institutions. Such growth demonstrates that although hedge funds are far from the dominant force they were in 2006–2007, they remain key players in U.S. fixed-income markets.

Hedge Funds Focusing on More Liquid Products
At their pre-crisis peak, hedge funds were generating 29% of all U.S. fixed-income trading volume. By 2009 that share had declined to just 12%. This year, hedge funds generated 19%. “Hedge funds over the past 12 months have been refocusing their attention onto more liquid products,” says Greenwich Associates consultant Tim Sangston. “This change in approach reflects both shifts in investment strategies and the impact of liquidity demands on the institutions that supply a growing share of hedge fund capital.”

The most obvious example of this shift can be seen in U.S. Treasuries. Looking at a matched sample of investors, hedge fund trading volume in government bonds increased by approximately 73% from 2009 to 2010. In 2009, hedge funds generated only about 3% of trading volume in government bonds; in 2010 that share jumped to approximately 20%. Although hedge funds still make up only a small part of the market for agency securities, their trading volume in this product increased more than 60% from year-to-year.

Hedge funds increased their share of total investment-grade credit trading volume to 26% in 2010 from 16% in 2009. “Hedge funds now account for about 42% of total trading volume generated in investment-grade credit default swaps and index products,” says Greenwich Associates consultant Frank Feenstra. Hedge funds also generate about 46% of total trading volume in high-yield credit, including 37% in cash bonds and 63% in CDS and index products.

Large Presence in Out-of-Favor Products
Hedge funds maintain a large presence in fixed-income products that have fallen out of favor among many U.S. institutions as a result of their historically poor performance and role in the global market crisis. For example, hedge funds account for almost two-thirds of trading volume in structured credit. “In other, less liquid products as well hedge funds still represent the bulk of the market, despite their increased activity in more liquid products,” says Greenwich Associates consultant Peter D’Amario. “For example, hedge funds account for approximately 90% of total trading volume in distressed debt, more than half of trading volume in leveraged loans, and more than a quarter in emerging markets.” Corporate website: www.greenwich.com

- FG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Legal - Hedge fund manager fights £8m tax tribunal ruling[more]

    From FT.com: A hedge fund manager who may have to repay £8m in tax is trying to overturn a tribunal ruling that found he had attempted to shelter millions in an avoidance scheme. Patrick Degorce, chief investment officer at Theleme Partners, lost a tax tribunal case last year. HM Revenue & Customs c

  2. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  3. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  4. Opalesque Exclusive: Gray Ghost Ventures aims to make impact investing commercially viable[more]

    Bailey McCann, Opalesque New York: At a time when investing in emerging markets may be falling out of fashion among some investors, Gray Ghost Ventures is confident that great opportunity exists in the emerging markets. The firm may have a unique view into this space as one of the first private

  5. Gross: Inflation is required to pay for prior inflation[more]

    Benedicte Gravrand, Opalesque Geneva: As inflation rises, every dollar will buy a smaller percentage of a good. While deflation will mean a decrease in the general price level of goods and services. These two economic conditions are both in the waiting room. The consensus would like the former to