U.S. institutional investors executed 50% of their equity trading volume through portfolio trades in the 12 months ended March 31, up from 44% in the prior 12 months, according to a Greenwich Associates report. Commissions fell to an average of 2.2 cents per share for portfolio trades, from 2.5 cents in 2003, with the most active portfolio trading institutions paying just 2 cents.
Most portfolio trading volume over the 12-month period was generated by trades related to cash-flow management, index rebalancing and manager transitions, according to the report, with 75% of all U.S. institutional investors using portfolio trading for cash-flow management and 57% using it for manager transition trades.
Self-directed electronic trading systems accounted for roughly 38% of portfolio trade volume for the 12-month period, up only slightly from the 35% reported in the prior 12 months. Greenwich analysts said self-directed volumes could fall back to levels closer to 2003 levels next year because of uneven usage among the largest institutions.