Long-only buy-side investment managers in the US expect the use of futures algorithms to take off in the next twelve months, will the volume of trading predicted to grow, finds Dan Barnes.
According to a recent study by Tabb Group, just 8%
traditional buy-side investors futures trading is seeking
alpha, compared to 62% for hedge funds and 90% for commodities
trading advisors. The majority of futures trading at long-only
firms (55%) is used to manage cash flows. However this is set
to change, says Matt Simon, analyst at research firm Tabb Group
and author of the report.
"Long-only firms will become more aggressive users of
futures as part of their portfolios," he asserts. "More futures
trading behaviour will be targeted at gaining exposure to the
asset class and generating alpha."
Simon’s report noted that pressure on buy-side
firms to deliver better returns is being driven by the ability
of investors to use passive investments, such as
exchange-traded funds, which replicate the performance of a
fund manager by tracking an index of stocks, selected according
to fixed rules.
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