Hedge funds surpassed mutual funds as a source of U.S. equity trading volume last year and now rank second only to traditional asset management shops.
According to new Greenwich Associates study, U.S. institutions stepped up the pace of their domestic equity trading activity last year, with the volume of commission paid increasing from $24.7 million in 2006-2007 to just over $26 million in 2007-08. Driving much of this growth were hedge funds, which generated nearly 30% U.S. institutional equity commission payments in the year ending February 2008, up from 24% in the previous year.
“Although the second half of 2007 was something of a wild ride, hedge fund performance for the year was relatively strong, and from a U.S. equity trading perspective, hedge funds were extremely active,” said Greenwich Associates consultant John Feng. “When you include the business from the new hedge funds added to our research universe from 2007 to 2008, hedge fund commission payments on U.S. equity trades increased more than 45%.”
Using the same metrics, equity commission payments by traditional investment managers increased by nearly 30% year-on-year and now account for some 47% of the market-wide total.
Mutual fund commission payments, by contrast, dropped for the third consecutive year, down roughly 19% from 2007 to 2008 after dropping almost 10% the previous year.