[ A Figure
L G O 4:
R I Number
T H M I of
C providers
T R A D I used
N G (%
S of
U R
V E Y ]
responses)
Hedge funds 2018
Hedge funds 2017
1-2
28
51.82
3-4
22
19.08
Figure 4: Number of providers used (% of responses)
>5
50
29.1
Hedge funds 2018
Hedge funds 2017
28
1-2
51.82
22
2-3
19.08
50
5+
29.1
0
10
impact (12.27%). There were
marginal year-on-year increases for
hedge funds using algos to achieve
lower commission rates or higher
speed/lower latency, but similarly
to decreases in improving trader
productivity or internal crossing,
these levels have stayed relatively
consistent since last year. While
greater customisation was men-
20
30
more relationships with more algo
providers, with firms manag-
ing more than $0.25 billion all
adopting multiple providers this
year. The same was largely true
of hedge funds, with only those in
the smaller end of the assets under
management (AuM) range scaling
back the number of providers they
used over the last year, particularly
“Those firms with the means to implement
more algos may, for now, merely be testing
the waters and shopping around for the best
functionality before settling on long-term strategic
relationships with select providers in future.”
tioned often by individual hedge
fund respondents as reasons for
seeking out new algo providers,
overall there was little change in
when firms cited this as a main
reason to trade via algorithms.
Long-only firms displayed a
greater appetite for taking on
76 // TheTrade // Summer 2018
those managing between $0.25-0.5
billion of assets reducing the aver-
age number of providers to 1.5.
Mid-sized hedge funds however,
displayed much more willing-
ness to engage with a host of algo
providers over the course of the
year, with the average number
40
50
60
of relationships increasing from
1.56 to 4.5. Clearly mid-sized asset
managers are taking advantage of
the competition in this space to
review their options in the new
regulatory-heavy environment as
a competitive differentiator. On
the largest end of the scale, hedge
funds with over $50 billion of
AuM also increased the number of
algo providers they used with an
average of 5.2, up from 3.68 in last
year’s survey.
Figure 4 lends more credence
to these trends, showing that half
of all hedge fund respondents for
this year’s survey now utilise, on
average, five or more algo providers
each, while one-quarter either use
one-two or three-four providers.
This represents a huge shift from
last year’s survey which found that
half of respondents were using be-
tween one and two algo providers,
with just over one-quarter using
five or more.
Those firms with the means to
implement more algos may, for now,