Forefront Communications

Markets Media: Institutional Asset Managers Warm to Outsourced Trading


Amanda Perrucci

Amanda Perrucci

Institutional asset managers are increasingly turning to outsourced trading desks like those at Tourmaline Partners to meet the challenges of heightened best execution requirements, market structure changes and shrinking commissions, a new report by Greenwich Associates reveals.

The report, Outsourced Trading: Helping The Buy Side Improve Execution And Enhance Operational Efficiency, was released this week and shared at the Equities Leaders Summit in Miami. It captures the sentiment of U.S.-based investment professionals towards this growing industry.

Of those who had used an outsourcing partner for some or all of their trading, the in-depth survey found satisfaction was extremely high, with 71 per cent saying they were “extremely satisfied” and 29 per cent saying they were “very satisfied” with the service they were receiving.

Not only for hedge funds

An outsourced trading desk is a brokerage firm that is structured to act as an extension of a buy-side trading desk. Until recently, they had often been associated with hedge funds or emerging managers. But Greenwich Associates spoke with some larger investors, including some managing over $20 billion in assets, that now work with outsourcing partners.

“Outsourced and supplemental trading are now starting to scale simply because there are a lot of other forces in the marketplace, both on the buy- and sell-side that are leading brokers and managers to think about their cost structures and the ability to lean on experts in other facets of their business”.“The genesis of the business was providing a trading resource to managers at launch who chose not to have their own in-house traders,” said Aaron Hantman, the chief executive officer of Tourmaline Partners, one of nine outsourced trading firms mentioned in the report.

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