Hedge Funds Surpass Mutual Funds In Equity Trading Volume

Date: Friday, July 18, 2008
Author: CNN Money

An equity investors study by Greenwich Associates showed trading volume generated by hedge funds surpassed mutual funds last year and now ranks second only to traditional asset-management shops.

The financial-consulting firm said the influence of hedge funds as a way of generating equity trading has helped Merrill Lynch & Co. (MER) and other firms " solidify" their standing as top U.S. brokers in terms of market share.

"Although the second half of 2007 was something of a wild ride, hedge-fund performance for the year was relatively strong, and from a U.S. equity trading perspective, hedge funds were extremely active," said Greenwich consultant John Feng.

Greenwich said nearly 30% of U.S. institutional equity commission payments in the year ended February were generated by hedge funds, up from 24% a year ago. Meanwhile, mutual-fund commission payments declined 19% after falling 10% the previous year.

Commissions paid by the typical U.S. institution increased to more than $26 million from $24.7 million.

Greenwich noted Merrill Lynch and Lehman Brothers Holdings Inc. (LEH) are the largest trading franchises, with market share between 8% and 9%. Goldman Sachs Group Inc. (GS), Credit Suisse Group (CS), Morgan Stanley (MS) and Citigroup Inc. (C) follow with 7% to 8% in market share.

The firm also said U.S. institutions gave the highest ratings for overall sales trading and trading quality to Merrill Lynch and Lehman.

-By Shara Tibken, Dow Jones Newswires; 201-938-2168; shara.tibken@dowjones.com