The gap in the market being filled by boutique outsourcers, like Fillmore, Arnold’s Meraki, Tourmaline Partners and CF Global, is prompting some big banks and brokerages to try to grab a slice of the action.
Northern Trust Corp and Jefferies Financial Group, for example, have set up their own outsourcing teams of traders working for a range of clients.
Such outsourced trading desks effectively work as units of “buy-side” investors like asset managers, and include all the analysis, administration and compliance services an in-house team would provide. They are distinct from a bank or brokerage’s regular “sell-side” trading operations which simply execute trades on a client’s behalf.
One in every five fund firms with over $50 billion worth of assets will outsource some portion of their trading desks by 2022, according to research by financial consultancy Opimas. Global revenues in the outsourced trading business are about $450-$500 million annually and expected to grow 20-30% a year, it said.
The practice of farming out trading functions has been around for years, but it is becoming increasingly attractive for small and mid-sized asset managers who may not be trading frequently or in big enough volumes to justify the cost of maintaining an in-house desk.
To read the full article, click here.