El Di�rio La Estrella – Hedge fund trading of bonds and derivatives in the U.S. more than doubled in the past year, giving the funds so much influence that some markets can’t operate efficientlywithout them, Greenwich Associates said.
Hedge funds accounted for 45 percent of annual trading in emerging-market bonds, 47 percent of distressed debt and 55 percent of credit derivatives in the 12 months ended March 30, Greenwich said in a report Wednesday. In the same period, overall trading in bonds and derivatives rose 25 percent, the Greenwich, Conn.-based consulting firm said.
“Because of the huge portion of the market that they represent, in some respects they are becoming the market maker” in some securities, said Greenwich consultant Karan Sampson, who co-wrote the report.
Hedge funds have encouraged brokers to develop new products, such as collateralized debt obligations, or securities backed by pools of loans or bonds, the report said. They have also caused investment banks to remake their research departments, cutting back on written reports and assigning analysts to devote more time to the funds, Greenwich said.
“The broker is going to have to come up with faster and better products to retain the activity of the hedge fund,” Sampson said.
