Hedges claim 30% of bond trading

Hedge funds have become the big fish in the debt-trading pool, according to a report by Greenwich Associates.
AUG 30, 2007
By  Bloomberg
Hedge funds have become the big fish in the debt-trading pool, responsible for nearly 30% of all U.S. fixed-income trading, according to a report by Greenwich Associates. Last year, total fixed-income trading volume hit $25 trillion, rising 10% from the prior year, according to the paper “In U.S. Fixed Income, Hedge Funds are the Biggest Game in Town,” which studied 1,333 institutions. Moving in on the fixed-income market, the hedge funds account for 86% of the distressed debt total volume and 41% of the U.S. leveraged loan trading volume. The hedge funds have also played their part in other areas of the debt market that has collapsed as subprime-mortgage loan dysfunction has spread: They generated a quarter of the trading volume from asset-backed securities and 20% of mortgage-backed securities volume. However, all is not well in fixed-income land, as hedge funds are more concerned about liquidity risk than other investors. Sixty percent of the polled funds said that the most relevant risks fixed-income investors faced were systemic or market related. Nearly two-third of overall investors agreed. Liquidity risk took second place, with 57% hedge fund managers expressing concern, compared to 47% of all U.S institutions.

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