Hedge funds have always been desirable destinations for investment banks’ traders seeking a big pay day, and all the more so after Brexit. But a move to the buy-side doesn't always work out.
For John Ruskin, co-founder of agency execution and clearing platform Coex Partners and the former global head of financial futures and options at SocGen-owned brokerage Newedge, now is the perfect time to pick up disaffected traders and portfolio managers who quit banking only to find hedge funds weren't the promised land after all.
“There are a lot of people who worked for an investment bank and then moved into a hedge fund managing money for a couple of years and realised it’s not for them,” he said. “Many don’t want to go back into banking, so there’s a really deep pool of talent available right now, and you can hire them on the right terms.”
What's wrong with working for a hedge fund? Ruskin didn't say exactly, but the industry hedge fund industry is notoriously political and impatient for results. Banks are gentler employers by comparison.
Whatever the reasons for traders' disaffection with hedge funds, Coex is cashing in. In the past few months it's hired James Fauset, the former head of hedge fund sales at Goldman Sachs who was most recently an FX strategist and portfolio manager at Brevan Howard, to lead its FX business. It’s also taken on Peter von Maydell, the former the former global head of foreign exchange strategy at Credit Suisse who worked as a portfolio manager at BlueCrest Capital Management, as a strategist.
“We’ve found most of our people through referrals from clients,” says Ruskin. “The client almost acts like a broker, and we trust their judgement. Most of the time it’s worked out.”
Coex is a futures and options broker that also offers trade advisory, best execution and FX strategy to macro hedge funds. It employs around 50 people, and was co-founded in 2014 by Ruskin and Alex Gerskowitch, who was previously UK head of financial futures and options at Newedge.
The two men are boyhood friends who attended Langley School for Boys in Beckenham, Kent together in the 1980s. After starting out as a trainee broker on the London International Financial Futures And Options Exchange (LIFFE) in 1990, Ruskin went on to found futures broker Cube Financial in 1999, which was eventually acquired by Societe Generale in 2006.
Gerskowitch says he’s “the man who didn’t sign the Beatles”. He joined Cube in 2004, at the point when they were negotiating with SocGen, but says he was instrumental in the sale process.
In broker terms, Newedge was huge. It had 600 people working there, 400 of whom were brokers according to Gerskowitch. But the scale meant that it moved from a typical eat-what-you-kill broker culture to something more like an investment bank. Ruskin and Gerskowitch explored the option of a management buyout, the idea being that they would cream off the top 20% of brokers launch a new firm with a potential headcount of 150 people. In the end, they went for something more specialist.
“Essentially we wanted to hire best people futures and options brokers, but this doesn’t just mean adding people with grey hairs,” said Ruskin. “So many brokers hire the same people in their 40s and 50s and we’re not chasing that. We want people who have worked in sales or trading or with a quantitative background.”
Gerskowitch says that hedge funds still value brokers, or at least the idea of being able to pick up the phone and get a broad multi-asset class view of the market from one individual rather than calling around various divisions investment banks’ trading desks. But Coex is also hopping on the move towards big data and artificial intelligence to inform trading decisions, so has been hiring people with quant backgrounds to help develop these products for hedge funds.
“We’re pulling in massive datasets and using rudimentary artificial intelligence to discover correlations and market trends,” says Gerskowitch. “A lot of big hedge funds are doing it themselves, but smaller firms don’t have the resources and demand for this is growing.”
Coex has built its team across London and New York by hiring ex-hedge fund portfolio managers, as well as senior sales professionals from Newedge and investment banks. In its execution team it brought in Marc Taylor, who previously worked as a director in FX sales at ANZ, Jefferies and Credit Suisse, Peter Russell, who worked at Millennium Global Investments and Dan Zalewski, a former director in fixed income algorithmic trading at Societe Generale.
“We have about 50 people and right now that’s about the right size,” says Gerskowitch. “It’s no longer about hiring one person with a deep relationship with a hedge fund who can bring in X revenues. Our staff have now got their product and got their pitch. If we do add in the future, it’s likely to be juniors.”
Photo: Coex Partners