GLOBAL – Pension fund and asset manager activity in the global foreign exchange market grew 48% last year according to consulting firm Greenwich Associates.

“Average foreign exchange trading volumes among fund managers and pension funds increased almost 48% from 2004 to 2005,” Greenwich said in a release today.

“As a result of this growth, the proportion of total global trading volume attributable to fund managers and pension funds increased from 15% in 2004 to almost 20% in 2005.”
It says trading by pension funds, asset managers and other ‘non-traditional’ traders helped global FX volume to rise by 14% last year.

“Although worldwide foreign exchange trading volumes increased in 2005 thanks to a considerable boost from fund managers, pension funds and non-traditional FX traders like the so-called “aggregators” that facilitate retail trading, the market could not maintain the 25% growth rate set in 2004,” Greenwich said.

It added: “As the recent acceleration in hedge fund trading activity stalled, fund managers and pension funds picked up the slack by increasing the amount of FX trading done in connection with cross-border investments and by becoming more active traders of foreign exchange as an independent asset class.”

“Foreign exchange trading volumes among the broad category of financial institutions increased 18% worldwide year-to-year, a level of activity far exceeding that of corporate FX users,” said consultant Peter D’Amario.

“Included in that financial category are fund managers and pensions, hedge funds, and banks and other types of financials that are sharply increasing their trading volumes due in large part to the growth of the retail customer base.”

The observations are based on Greenwich’s 2006 Global Treasury Management Research Study.

Earlier this month online trading firm FXall reported announced record trading volumes of $825bn in March, a 53% increase on the same period last year.

It said asset managers and pension funds were particularly instrumental in driving this growth - trading by these clients was up 80% on March 2005. “The reasons behind this growth include an increased focus on best execution, a rise in cross-border trading, and continuing interest in foreign exchange as an asset class.”

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