US Institutional Equity Trading 2019 Trends: Is Active Management an Endangered Species?

It’s a difficult time for active managers. Between the shift of assets from active to passive strategies and the global movement to unbundle research from commissions, the US institutional equity commission pool was down 42% from 2015 through 2018. This fee competition has impacted more than just asset managers, which are cutting costs, restructuring their trading and management strategies, and altering their brokerage providers. But it’s not all doom and gloom. A new wave of innovation is upon us. Brokers are reinventing their execution infrastructure. Asset managers are re-thinking their technology strategies. Exchanges and trading venues are developing novel ways for buyers and sellers to meet. And the ecosystem is consolidating as it right-sizes capacity on all fronts: asset manager, broker, trading venue, and technology vendor. This is the pretext for TABB Group’s 15th annual US Institutional Equity Trading study. This year our benchmark trading study is comprised of six studies – on Liquidity, Trends, Brokers, Market Structure, Research Unbundling, and Technology. Part 2, “Is Active Management an Endangered Species?” covers the high-level trends, including information on commissions, rates, order flow, buy-side priorities, the most widely used brokers, and more.

In Part 1, US Institutional Equity Trading 2019 Liquidity: Blocks, Algos, Analytics, and Impact, we reviewed buy-side views on liquidity, as well as usage and trends pertaining to volatility, block trading, conditional orders, central risk books, algorithmic execution, algo wheels, TCA, and performance measurement.