CHICAGO (May 3, 2018) - The Options Industry Council (OIC), an industry resource provided by OCC, the world’s largest equity derivatives clearing organization, today shared the results of a new study by Greenwich Associates, How Institutional Investors Use and Think About Exchange-Listed Options, which found that more than 80 percent of institutional investors surveyed who currently use exchange-listed options are satisfied with the performance against major market benchmarks.
OIC sponsored a Greenwich Associates study to take a closer look at how institutional investors use and perceive exchange-listed options strategies. Greenwich Associates interviewed 80 institutional investors in the U.S., including asset managers, corporate pension plans, public pension plans and endowments with total combined assets under management of more than $1 trillion.
The goal of the study was is to identify target audiences and educational strategies for the OIC that may lead to increased adoption of exchange-listed options strategies among institutional investors.
"The valuable insights gained from this study will support our continued efforts to provide the most relevant educational thought leadership to asset managers, pension funds, and endowments. We want to lead deeper discussions with the institutional investor community on the strategic benefits of exchange-listed options and how exchange-listed options strategies potentially improve risk-adjusted returns and address the pension elephant in the room, which is underfundedness," said Joseph Cusick, OIC Director of Institutional Investor Education.
Many U.S. public pension plans are facing a funding shortfall with assets not anticipated to sufficiently cover future liabilities. While historically investments in options strategies have been overlooked as a means to improve risk-adjusted returns, pension funds and endowments are exploring different investment strategies and exposure to alternative asset classes. The Greenwich Associates study found that almost half of the asset managers interviewed are considering future investments in exchange-listed options strategies and over a third are considering over-the-counter (OTC) options strategies. Exchange-listed options are deemed superior to OTC options by participants in the study, as they offer real-time price discovery, greater transparency, less regulatory complexity and since they are centrally cleared through OCC, there is reduced counterparty risk.
The study also found that only four percent of respondents disagreed that options strategies could improve the risk-adjusted return profile. Moreover, it showed that while institutional investors primarily look to implement exchange-listed options strategies for portfolio protection, risk diversity is another key driver as the non-linearity of exchange-listed options strategies means their potential returns come with less risk exposure in the fund.
Read the full study and view more findings.
The Options Industry Council (OIC) is an industry resource provided by OCC, the world’s largest equity derivatives clearing organization. OIC offers free and unbiased education to investors and financial advisors on the benefits and risks of using exchange-listed options to gain market exposure, generate income and as risk management solutions. OIC delivers its education through webinars, videos, podcasts, self-directed online courses and live assistance from OIC’s options professionals. OIC's resources can be accessed online at www.OptionsEducation.org.