While global markets are getting bigger, they are also getting thinner.
State Street Bank & Trust - which has US$6.2 trillion in assets under custody (or 12 per cent of the world's tradeable assets) and $720 billion under management - yesterday released fresh data on the global fund flows of its clients.
From the data - released to Hong Kong clients yesterday - London-based managing director and head of global research Avinash Persaud said he came to the 'unpopular' conclusion that increasing illiquidity was partly the result of an absence of hedge funds.
Furthermore, with the proliferation of electronic communication networks and the fragmentation of exchanges, liquidity was being taken away from exchanges.
'It means everyone needs to manage their liquidity more as it means the cost of trading goes up . . . it starts to eat into your investment returns.
'They need to be thinking more about timing - is it seasonal, is it better to trade on a Monday or a Friday? With this data we can tell clients as we rank markets by liquidity on a daily basis.' State Street also found investors' appetite for risk was growing and could increase further.