Let’s Talk Liquidity

Foreword
We are delighted to introduce this new research, “Let’s Talk Liquidity: Opportunities in a New Market Environment.” Drawing on the findings of a major survey commissioned by State Street and the Alternative Investment Management Association (AIMA), it explores the evolving market liquidity environment, driven by regulatory change and other factors.

We canvassed the views of 300 institutional asset owners, managers and hedge funds to explore how the current environment is driving innovative approaches and paving the way for new liquidity providers to emerge.

To reflect the diversity of insight across the industry, we also interviewed several financial industry participants, who were happy to speak on the record regarding these themes. We thank them for their participation.

The findings of this research are highly encouraging. Against a backdrop of structural evolution in markets, the industry is increasingly getting to grips with the resulting challenges. Asset owners and managers continue to enhance how they measure, model and report differing forms of liquidity, from market liquidity to fund liquidity. They are also looking to adapt investment strategies and increase portfolio diversification.

The report considers important new trends and potential future developments, including a growing role for hedge funds and other non-bank institutions as market liquidity providers.

Our survey results also highlight the ways in which technology and digital innovation are driving positive change. Electronic venues are helping to connect supply and demand participants more efficiently, and facilitate new partnerships that support the evolution and strength of the financial industry as a whole.