Outsourced trading improved performance for 85% of asset managers

Rick Steves

According to the State Street report, current users of outsourced trading consistently report benefits such as increased efficiencies (reported by 55% of current users), reduced costs (reported by 33%), and improved investment performance (more than 80% reported improved investment performance to some degree).

trading desk quants

A research survey conducted by State Street found that 85% of respondents from North America and 86% from Europe report improvements in their investment performance through outsourced trading.

“The Outsourced Trading Advantage: Evidence from Early Adopters” by State Street may be the largest and most comprehensive of its kind and explores the perceptions and the benefits of outsourced trading, including the experience with outsourced trading providers and future plans.

The study interviewed around 300 asset managers and asset owners from North America, EMEA, the UK, and APAC with AUM from under $30 billion to more than $50 billion.

“The real value outsourced trading is bringing to the industry”

According to the report, current users of outsourced trading consistently report benefits such as increased efficiencies (reported by 55% of current users), reduced costs (reported by 33%), and improved investment performance (more than 80% reported improved investment performance to some degree).

Satisfaction is very high among early adopters, with 79% saying they are either ‘satisfied’ or ‘very satisfied’. This rises to 83% in EMEA and 81% among very large funds (those with AUM over $50 billion), the research found.

Potential users have different views and reservations about outsourced trading compared with actual users. Potential users are most concerned about cost effectiveness (61%), loss of control over trading activities (56%), and a lack of understanding about the benefits of outsourced trading (56%).

Dan Morgan, head of Portfolio Solutions, State Street, said: “We have long believed that providing excellent service starts with knowing our market better than anyone else. With this ground-breaking research, we hope to shed light on the emerging move towards outsourced trading and provide clarity regarding the significant benefits it can offer. We are pleased that our expertise has been enhanced with the addition of the CF Global Trading team, now helping us deliver stronger offerings and services to clients.”

Scott Chace, co-founder of CF Global Trading and head of Trading for Portfolio Solutions at State Street, commented: “The findings from this survey highlight the potential and the real value outsourced trading is bringing to the industry, and we are well-equipped to help clients understand the offering and help with the integration.”

State Street outsourced trading significantly enhanced

State Street acquired CF Global Trading in February, which added significant scale and expertise to its existing outsourced trading solutions. CF Global Trading delivers an enhanced offering to clients across several asset types including foreign exchange, fixed income, equities, and exchanged traded derivatives; and supports clients in all major regions with trading desks in Boston, New York, Toronto, London, Lisbon, Hong Kong, and Sydney.

State Street’s upgraded outsourced trading service now includes:

  • Multi-asset class execution across equities, fixed income, exchange-traded derivatives and foreign exchange
  • Modular-based solutions that allow clients to outsource components of their trade execution without giving up control, as well as access to the front, middle and back office through State Street AlphaSM
  • 24-hour global trading capabilities across multi-asset classes via a transparent, broker neutral, agency model offering
  • Reduced operational risk with a robust risk management framework and business continuity back-up
  • Potential cost savings that allow clients to focus on what they do best

State Street has provided clients with outsourced trading solutions since 2010, and has invested in technology and people to provide a leading agency, multi asset class outsourced trading solution. State Street currently provides outsourced trading to clients in the Americas, APAC and Middle East, and CF Global Trading will extend the ability for the firm to provide these services to clients in the UK and the EU, where outsourced trading is maturing the fastest.

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