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Greater reliance on algorithmic trading seen in the hedge fund industry

By   /   March 24, 2014  /   No Comments

Hedge fund brokers are increasingly relying more heavily on equity trades made in through computer-driven strategies.

Rather than spending large amounts of time with individuals making trades, asset managers from smaller hedge funds are increasingly using computer algorithms to make assessed trades for them.

The use of these computing algorithm-based strategies is, experts have said, due to the need to continue adequately serving lower-paying clients whilst ensuring larger clients are paid more attention.  Brokers of hedge fund deals are required to complete deals in increasingly smaller time frames, making the technology almost absolutely necessary to get the work done.

A recent survey by TABB, a research company specialising in finance, has shown that out of the 58 hedge funds that they questioned, just over half were thinking of increasing the amount of money they put toward trading with algorithms this year.

This approach to trading has been named “low-touch”, indicating the lesser levels of input by skilled trading managers into the trading for lower funded clients. “High-touch” refers to a personal relationship between the seller and the buyer, where there is less reliance on technology to make deals.

This shift between hedge fund management styles is the largest to be seen in the industry in recent years, experts have noted. The automation of deals will become a necessity as the difficulties of the recession continue to demand more work for a lower budget. Rather than efforts being spread across both profitable and not as profitable clientele, there will be a definitive focus on those who make money.

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