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2017 Strongest Year for Alpha Capture and Network Growth since 2013

18th January 2018

The return to normality in correlation of market returns in 2017 has led to fantastic results all round, helping to drive demand in the market. In 2017 there were more launches of significant buy-side alpha capture programs than in the previous 5 years combined! The total amount of rewards allocated for performance of trade ideas has never been higher.

  • Globally the Sharpe return for a Long vs Short strategy with Ideas was > 3.4
  • In North America, dollar neutral returns for 2017 are in double digits with a Sharpe of 2.2 while September 2017 was the best performance month in more than 5 years
  • In the UK, Long/Short returns have exceeded 10% and continental Europe has produced a Sharpe ratio greater than 2
  • Japan has shown consistent alpha positive returns in 11 of the last 12 months
  • In Emerging markets, Longs have outpaced Shorts each and every month of the year and top decile stocks in the TIM have gone up more than 48% in India, 45% in China, and 47% in LatAm

On the sell-side, 2017 was an incredible year for growth in the network. Active author counts in North America and continental Europe are both up 25% YOY. Total idea volume on US stocks has spiked 23% over the same time period. With 2,900 sales authors from 297 firms in the network, overall monthly average idea counts now exceed 21,000 globally on stocks ranging from US large caps to small cap opportunities in emerging markets.

Regulatory changes have also favoured trade ideas. In Europe, MiFID II is encouraging transparent payment for trade ideas. In North America, it’s even clearer that trade ideas are not considered formal research, and can be paid for via cheque or commission.