-- The rise of electronic trading and growing popularity of portfolio trading has had an unintended consequence for the US corporate bond market: making private credit even more attractive.Jamie Dimon Sees ‘Lot of Inflationary Forces in Front of Us’
ETFs are not the only option for bond fund managers, and most trading by dollar volume is still performed over-the-counter by calling or messaging contacts at broker-dealers. Those relationships cannot be underestimated, especially during times of market stress, said Sinjin Bowron, portfolio manager at Beach Point Capital.
There are reasons investors have pursued these strategies beyond innovations in market structure. For years, investors had little choice but to allocate to alternative investments due to rock-bottom interest rates and few compelling ideas in traditional credit markets. Private-credit fundraising and deployment has more than doubled over the past five years to $1.7 trillion by the second half of 2023, according to Barclays data.
“The ETF is a really a game-changer for electronic trading in credit because effectively it culminates a lot of the risk characteristics into buckets,” said Wen.Take Man Numeric, a quant investment arm of Man Group Plc, the world’s largest publicly listed hedge-fund manager. The firm has been executing 90% of its high-yield and investment-grade trades through digital platforms and expects to get to 100% by next year, said Robert Lam, the firm’s co-head of credit.
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