GREENWICH, Conn. - A strikingly large number of institutional investors hold their fixed-income dealers partly responsible for their "unhappy" experience with 1994's poor-performing market, according to a report by Greenwich Associates.
A mere 30% give their top dealers high marks for interest rate forecasts and just more than 20% give them good grades for currency forecasting.
They also blame the dealers for lack of liquidity in many markets.
What's more, the advance of technology is enabling investors to access a wealth of information that had been available only through dealers. Consequently, Greenwich's report - "Who Needs Dealers?" - warns firms they must better meet client needs - or else.
Indeed, the number of dealers used by money market investors in the United States has dropped to seven from nine two years ago, and international bond investors in Japan have reduced the average number of dealers to 11 from 14.
In other findings: investors in the study hold $2.5 trillion of taxable U.S. fixed-income securities, including $883 billion in government securities; $734 billion in mortgage-backed securities; $71 billion in asset-backed securities; $524 billion in corporate bonds; $100 billion in medium-term notes; and $208 billion in money market instruments. This represents a modest 5% increase in total holdings since 1993. Seventy percent of investors hold securities in a variety of these sectors.
However, U.S. high-yield investments have increased 53% since 1993, to $132 billion from $86.1 billion in fixed-income and money market securities. Average portfolio size increased even more, to $1.2 billion from $700 million.