INVESTORS MORE ACTIVE IN GILT MARKET, SURVEY SAYS
Institutional investors are finding it
difficult to find "the best price" for transactions in U.K.
Government bonds (gilts) and have become more active in the
market since the deregulation of the London Stock Exchange in
October, agency broker Capel-Cure Myers said in a survey.
    The survey, covering a broad section of institutional
investors, also showed that investors were uneasy about the
impartiality of market makers' advice. Given their concerns,
over half those surveyed said they spend more time managing
their portfolios. At the same time, the investors believed the
market was more liquid and efficient than before Big Bang.
    Capel-Cure, a unit of Australia and New Zealand Banking
Group Ltd, conducted the survey during January among 70
institutions which are not clients of that firm.
    Banks and merchant banks accounted for 32 pct of the total,
building societies 30 pct, life assurance companies 20 pct,
insurance companies 11 pct and pension funds seven pct.
    The survey found that with the virtual elimination of
commissions, the improved market liquidity has encouraged
investors to deal more frequently in the market. Of those
responding, 70 pct were encouraged to deal more actively, 25
pct which saw no change and five pct dealt less actively.
    A Capel-Cure official told reporters the elimination of
commissions has made the market more competitive.
    He said Capel-Cure has deliberately set low commisstions
because of this.
    Nearly half the respondents said they now have their own
dealing team to cope with the new market, although the
definition of a "dealing team" was ambiguous, the survey said.
    Rather than being a self-contained, specialised group of
dealers who spend all their time searching for prices, the
definition now appears to be the less formal idea of a
multi-purpose fund manager, it said.
    The survey supported the general view in the gilt market
that a shake-out of the 27 market-makers is likely.
    It showed nearly 90 pct of the respondents believed that
the total number of market makers in three years time would be
less than 20, while 46 pct thought the number would be less
than 15.
    Some 79 pct of respondents said they expect the number of
agency brokers (for which there was no estimate) to fall over
the next three years. Unlike broker/dealers, agency brokers do
not take positions in the market, but the survey showed 68 pct
of respondents did not consider this very important when
deciding whether to use one.
 REUTER
