According to the Financial Times, the survey was included in a larger report on shrinking US equity trading volumes, which fell to a five year low in July. Stock markets around the world have been hurting as equity trading has slowed in the wake of the 2008 financial crisis. While no one is 100% clear on why equity market volumes are down overall, one theory is that big investors are losing their risk appetite and pulling out of stock: something that many pension funds in Canada are focused on as they shift to LDI strategies and focus on mitigating volatility in their portfolios (we heard this a lot at the 2012 Risk Management Conference last week).
As big investors pull out of stocks, declining interest in equities could also have a longer-term impact on ETFs that track equity indices. In fact ETFs in the US already seeing a slowdown: according to Credit Suisse, the average daily traded value of US listed ETFs in the first seven months of 2012 was down 12% from the same period a year ago. While ETFs are benefiting from volatile macro-economic risk factors, they could also get a boost when things calm down and investors start to get their risk appetite back. When could that happen? That’s the question on everyone’s minds…