As fixed income instruments become more complex and hedge funds are beginning to set their sights on predictable returns, many are turning to the bond market. In fact, in the past 12 months through April, hedge funds accounted for a full 30% of all bond trading—double from the previous year, The Wall Street Journal reports, citing a study by Greenwich Associates.
Of bond trades involving investment-grade derivatives, hedge funds accounted for 55% of all trades, the same amount as they did for emerging-market bonds. But for high-yield derivatives, hedge funds accounted for 80% of the volume. And for distressed debt, hedge funds went after 85% of the trades.