The Last Place for Traders to Earn Real Money
It’s not the U.S. but China, where an inefficient market means that star managers with smarts and the right connections can make a killing.
China’s equity markets are among the world’s most liquid.
Photographer: Nicolas Asfour/AFP/Getty Images
China’s economy may be slowing, its society may be aging, its companies may be running into a buzzsaw of investment restrictions abroad and its mountain of debt continues to grow. Still, the mainland may be the only place left in the world for traders to make real money.
Across the rest of the globe, anemic trading is weighing down bank revenues. With the rise of passive funds, which by now account for an estimated 40 percent of trading, active managers find it increasingly difficult to defend their higher management fees, especially when new ETFs are offering investors money to hold their products. Since 2004, only 11 percent of active funds have outperformed their benchmark, according to Index Fund Advisors.
Despite the seemingly endless U.S. bull run -- the S&P 500 has rebounded nicely from its December low -- the U.S. market is also much weaker than meets the eye. The most obvious symptom is a lack of trading volumes, which is rare for a bull market. A dearth of IPOs compounds the problem: The universe of public companies has been shrinking since the 1990s. Both trends are sapping investment banking income.