NEW YORK--(BUSINESS WIRE)--Ninety percent of institutional traders at leading asset management firms in Asia rank their regional markets outside of Japan and China as having the highest investment potential and 66% of U.S. traders were similarly optimistic about their home market, according to a survey conducted by Liquidnet, the global institutional trading network.
In contrast, European traders see local markets as challenging with only 14% ranking European markets as having attractive investment potential.
Liquidnet’s annual Institutional Voice Survey polled traders worldwide from Liquidnet’s community of 630 institutional asset management firms. These firms collectively manage equity assets of more than $12.5 trillion.
Asked to compare the investment potential of global markets, traders diverged sharply on their outlooks for developed and developing markets:
- European traders saw the most investment potential in markets that included China (58%), regional Asian markets outside Japan and China (40%), and India (42%). Europeans were favorably inclined to Brazil (33%) and Africa (33%), and mirrored Asians’ de-emphasis of the U.S. market, which attracted only 18% of the mentions.
- Only 23% of U.S. traders found European markets favorable. Among emerging markets, more than 44% of U.S. traders ranked Brazil as having more potential, surpassing the 38% of votes China received.
- Only 10% of traders in Asia saw the U.S. as having strong investment potential, and only 7% ranked Europe as attractive. Similarly, Brazil drew only 17% of Asian traders’ mentions. In contrast, more than half (52%) saw India as having high investment potential followed by China at 45%.
“Many of these traders, who have a front row seat to the global markets on a daily basis, see significant investing opportunities in many of the more rapidly growing economies outside of their own backyard,” said Seth Merrin, founder and CEO of Liquidnet. “During these volatile times, institutions are increasingly looking beyond their home markets to access the best investments possible regardless of where they may be in the world. The ability to open up these trading opportunities around the world will help create a more efficient market for all traders.”
“We Need More Block Size Liquidity” Traders Say
In the same survey, global averages show that more than 80% of traders say the biggest hurdle to achieving the best price in equity trades is finding liquidity for executing transactions of large blocks of stock.
“Our survey gives a measure, for the first time, of the extent of traders’ concern about the scarcity of liquidity for block trades in global markets. As institutions look around the globe to realize the best investment opportunities, lack of block liquidity is one of the major barriers to trading and performance erosion,” continued Merrin. “It is critical that traders be able to access institutional sized liquidity in high growth markets throughout the world so that they can deliver better performance to their investors.”
Out of all regions, European traders (92%) regarded the lack of block liquidity as the biggest challenge to achieving what regulators and industry professionals refer to as “best execution.” Concerns also ran high among traders located in North America (77%) and Asia Pacific (79%).
Traders believe the leakage of information about their trades and positions was driving up the cost of executing trades for the long-term investment portfolios they manage. Nearly half the U.S. traders surveyed (48%) say that compromised anonymity challenged their ability to achieve best execution and is a major factor increasing “market impact” costs. At the same time, 97% of traders confirmed that “avoiding information leakage” was extremely important or very important to them.
The survey showed that traders in the Asia Pacific region were particularly concerned about market impact of their trades, with 70%, citing this factor as among the top challenges to achieving best execution. This compared with 55% among North American traders and 56% among European traders.
Survey Methodology
Liquidnet’s Institutional Voice Survey was developed to gauge insights and market sentiment annually from traders from the world’s leading mutual funds, pension funds and hedge funds, who hold approximately 70% of equity assets under management in the U.S. The results from this year’s survey are based on more than 300 responses from firms based in North America, Europe and the Asia-Pacific Region. Participants were polled during a three-week period ending July 7, 2011.
About Liquidnet
Liquidnet is the global institutional trading network that connects equity investors with the liquidity they need– in size, at any time, from anywhere. We go beyond what the current market can provide by defending and securing the integrity and anonymity of the block trade. We do this while continuously looking for ways to bring in new sources of safe, actionable liquidity from asset management firms, exchanges, brokers and corporations. Since we launched in 2001, our ability to anticipate and meet institutional demand has allowed us to extend trading to 39 equity markets across five continents for asset management firms who collectively manage US$12.5 trillion. For more information on the Liquidnet community, its liquidity, block executions, and additional investment capabilities, visit www.liquidnet.com.
© 2011 Liquidnet Holdings, Inc. and its subsidiaries. Liquidnet, Inc. is a member of FINRA/SIPC. Liquidnet Europe Limited is authorized and regulated by the Financial Services Authority in the UK and licensed by the Financial Services Board in South Africa, and is a member of the London Stock Exchange and a remote member of the Warsaw Stock Exchange and SIX Swiss Exchange. Liquidnet Canada Inc. is a member of IIROC and a member of Canadian Investor Protection Fund. Liquidnet Asia Limited is regulated by the Hong Kong Securities and Futures Commission as a licensed dealer and a provider of automated trading services pursuant to the Securities and Futures Ordinance and is regulated by the Monetary Authority of Singapore as a Recognized Market Operator. Liquidnet Japan Inc. is regulated by the Financial Services Agency of Japan and is a member of JSDA/JIPF. Liquidnet Australia Pty Ltd. is a licensed corporation under the Corporations Act of Australia, AFSL number 312525, , and is registered as an overseas company in New Zealand, number 2407809.