Up to half of all shares traded by the world's largest sovereign wealth fund are bought and sold outside of stock markets in a bid to cut transaction costs, a fivefold rise since 2010, a senior executive at Norges Bank Investment Management (NBIM) said.
The manager of Norway's $873 billion oil fund is gradually moving away from automated trading in favour of a measured approach that even includes the services of stockbrokers, Chief Investment Officer for Asset Strategies Oyvind Schanke said.
In a recent report, NBIM argued that global stock exchanges are failing to meet the needs of large institutional investors as the race towards ever faster buying and selling is both unnecessary and costly, benefiting only high-frequency traders.
"I believe more and more people realise that being part of the speed race is unnecessary ... We're seeking to slow things down," Schanke said in an interview with Reuters at the fund's head office in Oslo.
With more than 9,000 companies in its portfolio, NBIM owns on average 1.3 percent of all listed shares globally. About 62 percent of its funds are invested in stocks, while 35 percent is in bonds and the remaining in real estate.
In 2008 about three quarters of the fund's share trading was done via algorithms, but that number is now down to around 40-42 percent, Schanke said.
"We've cut back on it and are instead actively looking for liquidity," he added. "The cost of trading rose over time and only began to fall when we began to seek out blocks (of shares)."
Schanke estimated that 40-50 percent of the fund's share purchases are now done in large batches rather than in incremental trades of smaller stakes. As late as 2010, block trading made up only around 10 percent of the volumes.
NBIM is also a co-founder of Plato Partnership, a trading platform being developed by banks, asset managers and brokers to enable the execution of large trades without alerting high-frequency traders to the intention to buy or sell.