North American Equity Derivatives Becoming Commonplace Tools

The results of Greenwich Associates’ 2007 North American Equity Derivatives Research Study, which targeted over 200 active investors in the US and Canada, reveal that it is becoming common practice at North American institutions for cash portfolio managers to work in conjunction with traders and equity derivatives specialists to achieve investment goals. As equity derivatives move into the mainstream, the use of liquid flow products such as options, futures and exchange-traded funds has become ubiquitous among US institutions. In addition, the universe of equity derivatives investors is expanding as a growing number of hedge funds enter the market. Although the use of structured/securitised equity products is much less common among North American institutions, it too is on the rise. Forty-two per cent of study participants in 2007 say they use structured equity derivatives, up from 34% in 2006. The institutions targeted in the Greenwich Associates study traded an estimated US$35bn notional in structured/securitised equity products in the 12 months covered in the research. More than three quarters of these institutions use single-stock or basket-based products, and about 40% use index-linked products. Smaller proportions use hedge fund and mutual fund-linked contracts.


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