Patrick Boyle, a former trader at Nomura Holdings Inc. (8604) and Royal Bank of Scotland Group Plc (RBS), is starting a hedge fund with backing from Stanley Fink’s International Standard Asset Management Ltd.
Boyle plans to begin trading at London-based Palomar Capital LLP in August with $50 million, he said in an interview this month. Fink’s ISAM, which manages about $1 billion, has agreed to be an initial investor, according to a person with direct knowledge of the situation who declined to be identified because the matter is private.
Palomar uses computer algorithms to try to spot profitable investments in futures tied to stock indexes such as the Standard and Poor’s 500 Index and the FTSE 100. Boyle, 36, joins a growing group of traders who have left firms including Citigroup Inc. and JPMorgan Chase & Co. as banks reduced risk taking after the collapse of Lehman Brothers Holdings Inc. intensified the 2008 financial crisis.
“For a system like mine, the direction of the market doesn’t really matter that much,” Boyle said. “I don’t need it to be an up year or a down year to make money, but I do need the market to move in a somewhat predictable way. During the credit crunch, you had moves that were somewhat predictable if massive.”
Boyle’s trading system produced a 12 percent gain in 2008 when he was running it as a proprietary trader at Edinburgh, based RBS, Palomar marketing documents show. Hedge funds on average fell 19 percent in 2008, making it the industry’s worst year ever, according to Chicago-based Hedge Fund Research Inc.
Michael Strachan, a spokesman for RBS, declined to comment.
Palomar will use past financial research to try to predict how other traders will respond to changes in market sentiment. Palomar’s computer-driven trades are directional, meaning it either bets market values will rise or fall. The firm will hold positions for as briefly as 30 minutes or as long as three days, according to the marketing documents. Other quantitative directional hedge funds have gained 3.8 percent on average in the first six months of the year after falling 7.2 percent in 2011, according to Hedge Fund Research.
Boyle said his trading program has never made an annual loss since he started running it in 2001. Palomar could manage as much as $1 billion before Boyle would become concerned that the amount of assets overseen might hurt returns, he said. He left Tokyo-based Nomura in 2011 and previously worked at Israel Englander’s New York-based hedge fund, Millennium Management LLC. Boyle traded at RBS from 2006 through 2009.
Fink, 54, started London-based ISAM in 2008 to manage so- called systematic hedge funds that use computers to trade futures on currencies, commodities and other assets. Fink was previously chief executive officer of Man Group Plc (EMG), the world’s biggest publicly traded hedge fund. He is also a former co- treasurer of the U.K.’s conservative political party.
Boyle’s current registration with the U.K.’s Financial Services Authority is through ISAM. He wouldn’t comment on ISAM and officials at the company declined to comment.
Other traders who have left banks for hedge funds include Sutesh Sharma, who resigned from Citigroup in 2011 to found Portman Square Capital LLP, and Mike Stewart, who departed JPMorgan to start Whard Stewart Asset Management Ltd. this year.
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