A survey by Greenwich Associates indicates institutional portfolio managers believe they are paying a higher proportion of their total commissions for research than traders. The research suggests this is a fundamental disconnect that, along with an overall decline in equity commissions in 2003, may well be changing how business is conducted in this market. ‘This may cause some brokers, including some key brokers, to direct more business toward trading and to cut back the research and sales services which they provide to institutions,’ Greenwich Associates consultant John Colon said. The survey incorporated the opinion of over 700 institutional investing professionals in 17 European countries. A separate survey by the organisation found that portfolio trading now accounts for more than 40 per cent of share trading volume at more than 100 of the largest North American institutional investors, including investment management firms, quantitative funds, hedge funds and pension funds. North American institutions are using portfolio trading more often for trading international shares, as well as for domestic shares, where the focus of portfolio trading remains. The volume of portfolio trading in U.K. and continental European stocks by U.S. and Canadian-based funds has nearly doubled over the past year – from 9 per cent of volume in 2002 to 16 per cent in 2003.
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