With their recent study, A Deeper Dive into the Outsourced Trading Evolution, Coalition Greenwich and Shane Swanson have done an exemplary job of educating the marketplace on the types of providers and use cases for both outsourced and supplemental trading.
One key takeaway from the report is the continued growth of the space – Coalition Greenwich found that in the last four years, the number of outsourced trading providers has grown more than 400%. But these offerings are not created equal.
As expected, the report highlights that independence and scale are integral to helping investment managers source liquidity and enhance trading performance. Notably, these variables are the key drivers of Tourmaline Partners’ growth, and a “must-have” for larger managers seeking to empower in-house trading teams. Clearly, the industry is seeing the benefits of the buy-side-centric model.
We expect that supplemental trading will soon be institutionalized as managers of all sizes recognize the value of having expert support to augment their in-house resources. In particular, we see demand from senior buy-side traders to help with a number of key initiatives:
- Expand reach to liquidity information, blocks, color and research
- Help with small cap / closely held / illiquid names
- Trade offshore markets
- Address bandwidth issues / BCP
- Gain expertise / access to greater high- and low-touch trading solutions / derivatives
- Seek anonymity to help reduce information leakage
With a team of 37 experienced traders in the U.S., London and Sydney, and operating as a large buy-side client to more than 400 global brokers, Tourmaline is uniquely positioned to deliver on these core tasks for the world’s leading investment managers.