Hedge funds, which have become increasingly important players throughout the fixed-income markets in the past couple of years, have been herding with especial zeal into emerging market debt. While hedge funds make up 15% of total fixed-income volumes and 25% of the trading volume in speculative-grade debt, for instance, they now make up more than 45% of trading volume in emerging markets, up from 30% last year.
The numbers have led Greenwich Associates to say that emerging markets have now reached the point at which they could not function efficiently without hedge fund involvement. “In many ways,” says Greenwich Associates consultant Peter D’Amario, hedge funds “have become the market.”
Hedge funds now dominate the world...
