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Fig 3: Types of algo used
Vwap
Hedge Funds 2017
Long-only 2017
Twap
Implementation
shortfall
(single stock)
Implementation
shortfall (basket)
Dark liquidity
seeking
% Volume
(participation)
0.0
10.00 20.00
30.00 40.00 50.00 60.00 70.00 80.00 90.00
Percentage of respondents
differences.
However, some minor discrepan-
cies can be revealing. Over 9% of
hedge funds said lower commis-
sion rates were a priority for them
compared to 7.5% for long-only
funds. Given that at least some
part of a hedge fund strategy is to
make returns from trading activity,
rather than purely on increasing
security prices and dividend in-
come. Keeping fees low is thus vital
to realising their goals. Custom-
isation was also a bigger priority
for hedge funds, at 7% compared
to 5.9%, again perhaps reflecting
their desire to take more control of
their trading to be able to use their
sophisticated strategies to the best
effect.
Hedge funds on average tend to
use less providers than long-only
funds. Fig.4 shows over half use
only one or two providers, while
19.1% use three-four providers
and 29.1% use five or more. This
compared to a fairly even split of
around a third of long-only funds
in each category. This may be
because less providers in general
offer the kind of specialist services
hedge funds need, but could also
be due to rationalisation of client
books falling particularly heav-
ily on hedge funds compared to
long-only funds.
For a fuller view of the major
trends seen in this year’s Algo-
rithmic Trading Survey, check out
our write-up from the Spring 2017
edition of The TRADE, available in
print and online.
Issue 53
TheTradeNews.com
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