Deutsche Bank Bolsters Asian Equity Derivatives After SlumpBy and
At least six bankers hired under James Boyle since July
Moves come as firm expects increased client demand in region
Deutsche Bank AG, the lender pulling back from some trading businesses, is beefing up its Asia-Pacific equity-derivatives unit as it looks to capitalize on expected demand for quantitative strategies from local investors.
David Bruchet, formerly of Societe Generale SA, will join the German bank in Hong Kong as an index equity-derivatives trader at the end of January, said James Boyle, head of equities and co-head of global equity derivatives, who was hired from Citigroup Inc. in July. Bruchet becomes at least the sixth hire in the region under Boyle, who is putting in place his strategy to turn around Deutsche Bank’s fortunes in equity-derivatives trading.
Chief Executive Officer John Cryan is seeking to boost stock-trading operations while pulling back from other investment-banking businesses that are grappling with stiffer capital rules and the cost of settling legal problems. The strategy has yet to pay off, as the equities unit slumped in 2016 and lags behind the Frankfurt-based firm’s rivals.
“Clients have money to put to work in Asia after being on the sidelines this year, and Deutsche Bank has expertise in quantitative strategies,” Hong Kong-based Boyle said in an interview.
Deutsche Bank’s equities trading revenue fell 25 percent in the first nine months of this year, worse than the 14 percent collective drop among nine of the biggest global investment banks, according to data from Bloomberg Intelligence. It was as low as sixth in Coalition Development Ltd.’s 2015 rankings for Asia-Pacific equities, compared to first for fixed income.
The desks in Hong Kong and Singapore will trade around the world, Boyle said.
“We are ramping up here as investor demand in Asia is increasingly for global products,” he said. “They also want more diversification and the U.S. market is deep and liquid.”
Global assets in quantitative strategy funds are on pace to grow to $1.2 trillion in 2019 from $265 billion in 2014, according to research from Citigroup. Two smart beta funds -- which look at factors such as low volatility or dividend payouts rather than market capitalization -- started by Goldman Sachs Group Inc. in September now manage more than $1.1 billion.
In August, Credit Suisse Group AG hired Matthew Rothman as the head of quantitative equity research to build a global team of quants, while Axa Investment Managers recruited three Goldman Sachs bankers earlier this year for a liquid absolute returns fund.
The trend bucks the broader move to cut trading staff amid underpeformance in traditional equity-derivatives products. Global revenues were 27 percent lower at the end of the third quarter from a year earlier, as clients’ risk appetite waned and trading volumes remained subdued, Coalition Development’s latest data shows. Standard Chartered Plc exited the business 12 months ago, while Commerzbank AG said last month it would spin off its structured equities business into a separate unit.
At Deutsche Bank, sales from equity derivatives were “significantly lower” in each quarter for the year through June before improving in the third quarter of 2016, according to company presentations. Clients pulled back from trading, compounding other problems including “challenging risk management” and losses from securities that the lender held on its own balance sheet, the presentations show.
“Active management is challenging and risk-adjusted returns are superior from quantitative strategies, which can take advantage of volatility and market dislocations while also being more profitable for us,” said Boyle.
Among Boyle’s other hires are Eric Jungers, head of synthetic equity trading for Asia Pacific, and derivatives strategist Lars Naeckter, who both joined in September. Deutsche Bank also hired Benjamin Biette from BNP Paribas SA as head of equity structuring for Asia in August, and ex-Natixis SA executive Mederic Gehl started an equity structuring role in Singapore in July.
Deutsche Bank also added Claire Arnaudo from BNP Paribas as head of multi-asset retail distribution, said Boyle, as the bank expands its retail structured products business.