GUEST COMMENT: Time for prop traders to take refuge in hedge fund hotels
If you're a trader in an investment bank you may be feeling put out. We're getting a lot of calls from friends at major banks who are being offered their bonuses in paper, even though they were told this wouldn't be the case. Patience is wearing thin.
If you're fed up with collecting a tiny fraction of your P&L in cash each year, there is an alternative. Experienced traders now have every reason to work for themselves.
One way of doing this is under the auspices of a 'hedge fund hotel.' These set-ups cater for all sizes of trading operation and offer both a ready-made comprehensive infrastructure and access to multiple clearers in cash and derivative products in all markets.
As in a normal hotel, there are differing degrees of service on offer. At a minimum, residents can benefit from basic connectivity and a desk. In addition to this a full complement of non-trading activities are available. These include clearing relationships, counterparty management, regulatory & compliance oversight, commercial administration (PA support, switchboard and all commercial administration, including travel concierge etc), finance and book keeping services, IT/market data support (& Disaster recovery services), operations management, preferential centralised procurement, assistance with company and regulatory set up etc. etc.
The idea is that the hotel will provide a suite of services allowing the traders or portfolio managers to concentrate simply on making money. Opportunity costs arising from the need to deal with the intricacies of running a business are massively reduced.
The costs associated with a hedge fund hotel are variable. Residents have the ability to grow as required, but don't have to pay for capacity in advance. They also have the social advantage of being around others who are engaged in similar activities.
We already house a number of different trading groups and are looking at other funds. In 2011, we're expecting to take on 3 or more additional residents. We anticipate that traders leaving investment banks will be at the front of the queue.
