October 26, 2022 | Stamford, CT — As fixed-income markets become digital, faster and more complex, institutional investors are adopting quantimental investment approaches in which fundamental methodologies are supported by quantitative tools powered by cloud computing, artificial intelligence (AI) and even distributed ledger technology (DLT).
More than three-quarters of institutional fixed-income investors now describe their strategies as quantimental, and the shift is driven by two factors: first, the surge in the volume of digital information linked to bonds, and second, technology advances that enable investors to analyze and exploit that data.
“The distinction between quantitative and fundamental investment methodologies becomes less meaningful when traders are sitting side by side on the desk with data scientists and coders,” says Audrey Blater, Senior Analyst for Coalition Greenwich Market Structure & Technology and author of Transforming Today’s Fixed-Income Markets. “In terms of portfolio optimization, the cloud acts as the brain. It sits in the middle of market technology tools and data aggregation, making it possible to dynamically analyze the portfolio and react to changing market conditions accordingly.”
The increasing sophistication and popularity of pre-trade analytics have created a rush for reliable sources of data. Nearly 60% of participants in a recent global study now consume streaming dealer prices through a vendor solution. More than half receive axes and runs via a third party and about one-quarter use evaluative pricing from a third-party provider.
“Over the next two years, the mantra for institutional fixed-income investors will be BBI—build, buy and integrate,” says Audrey Blater.
Transforming Today’s Fixed-Income Markets provides a comprehensive look at the data and technology used by the buy side in fixed-income investing. The report analyzes institutions’ primary investment methodologies, their use of analytics and their main sources of data. It examines what technologies institutions are employing, what types of investment and tech talent they are looking to hire in the next one to two years, and how they are developing their technology infrastructure to drive the evolution of institutional fixed-income investing in the future.