BlueCrest Binges on Wall Street Defectors in Bond-Market BetsLisa Abramowicz
BlueCrest Capital Management LLP is accelerating its hires from Wall Street’s biggest banks as the hedge-fund manager takes advantage of compensation cuts to strengthen its foothold in fixed-income markets.
William Yearick, an interest-rate options trader, left Deutsche Bank AG last month with plans to join the $35 billion fund manager, according to three people familiar with the matter. John Roach, a mortgage-debt trader, and Matt Siravo, a distressed-debt analyst, left Germany’s biggest lender for BlueCrest this year, people familiar with those moves said previously. They are joining at least four other debt traders hired from lenders including Morgan Stanley and Bank of America Corp. in the past two years.
BlueCrest has increased its assets by more than a quarter since 2011 as it seeks to create an “investment-bank quality” trading group, pushing traders to avoid big bets on the direction of bond prices and instead profit from smaller market anomalies, according to its website. The firm, run by former JPMorgan Chase & Co. proprietary trader Michael Platt, is expanding as Wall Street reduces the amount of money it commits to facilitate trading in the face of risk-curbing regulations.
“They can do things that the big firms are not focusing on anymore or where they really can’t compete anymore,” said Jeanne Branthover, managing director at Boyden Global Executive Search in New York. “If you have the right people and it becomes the right environment, you’re going to see a firm take market share.”
Four years after the depths of the worst financial crisis since the Great Depression, the world’s biggest banks are cutting thousands of jobs as they seek to comply with higher global capital requirements and the Dodd-Frank Act, passed by U.S. Congress in 2010 to limit the risks bank take with their own money.
The 21 primary dealers that do business with the Federal Reserve have reduced their corporate-bond inventories by 76 percent since the pre-crisis peak, to $57.3 billion on March 20 from $235 billion in October 2007, Fed data compiled by Bloomberg show.
Deutsche Bank has lost at least seven credit traders and salesmen this year to money managers as it overhauls compensation and cuts almost 2,000 jobs. That follows the departures of at least 10 from its New York credit group since the start of 2011.
BlueCrest has boosted its assets by about $7 billion since the end of 2011 as a fifth year of short-term interest rates near zero and unprecedented bond buying by the Fed pushes investors into riskier investments.
John Silvetz started at the firm in September 2011 from Deutsche Bank’s securities unit in New York, where he traded some of the most distressed bonds and derivatives in debt markets. Last year, BlueCrest hired Stefano Galiani from Deutsche Bank, Eugene Gokhvat from Morgan Stanley and John McNiff, who was co-head of trading in commercial-mortgage securities at Bank of America.
Yearick, who joined Deutsche Bank from Goldman Sachs in December 2008, didn’t respond to messages left on his mobile phone seeking comment. Ed Orlebar, a BlueCrest spokesman, declined to comment, as did Renee Calabro, a Deutsche Bank spokeswoman.
Roach departed Deutsche Bank as the firm shuttered a proprietary trading group, the people familiar with those decisions said last month, asking not to be identified because the moves aren’t public.
Platt co-founded BlueCrest in 2000 with William Reeves after leaving JPMorgan as managing directors. It operates with a “specialist structure” that encourages “significantly less concentrated risk and can allow the portfolio managers to focus on smaller, more esoteric anomalies that are often overlooked,” according to the website.
Corporate bonds globally have returned 1.04 percent this year, following a 12 percent gain in 2012, according to Bank of America Merrill Lynch index data.