GREENWICH, Conn. — U.S. pension funds helped drive a 35% increase in portfolio trading — also known as program trading — to a total of $1 trillion in the 12 months ended April 30, according to a survey by Greenwich Associates.
Large pension funds executed nearly two-thirds of their total equity volume as portfolio trades during this period, while institutional investors overall handled about 50% of their equity trades as portfolio trades, a level expected to reach 55% soon.
On average, portfolio trading totaled $9.2 billion at institutions surveyed by Greenwich, up 35% from a year earlier. At the largest institutions, portfolio trading jumped 60%. For the report, Greenwich surveyed 128 institutions in the United States and Canada, including investment managers, quantitative funds, hedge funds and pension funds.
Jay Bennett, one of the report's authors, said in an interview that growth in program trading itself was not surprising given overall industry trends including more automated trading methods and opportunities, but growth in program trading of non-U.S. equities was striking.
"The growth on the non-dollar side impressed me," said Mr. Bennett, a Greenwich managing director. "That suggests portfolio trading is not simply a U.S.-dollar cost-driven exercise. Institutions are looking into their global portfolios and found this (trading) has been a much more effective way of managing these exposures."
Specifically, European stocks made up 16% of portfolio trading volume in the 12 months, up from 10% in the prior 12-month period. Asia-Pacific stock trades, including Japan, made up 10% of total portfolio trading volume in this year's survey, compared with 6% in the 12 months ended April 30, 2004.