Kevin shares his personal story of how he started his career on the sell side and the reasons why he moved across to the buy side in 2016, together with the challenges he faces in the world of fixed income buy-side trading.
Tell us about how you started working in finance?
I started my career back in 2001. I’d recently graduated from University with a degree in Psychology and was hired into the Derivative Operations team at Deutsche Bank in London. At the time, this area of the market was rapidly expanding, new products were evolving and Deutsche Bank was at the cutting edge. Despite being a long way from the front line, I loved learning about the business, quickly embraced the entrepreneurial nature of the institution and the meritocratic opportunities on offer if you were willing to work hard – I was hooked! I was promoted across a number of operational roles before being offered an opportunity in 2005 to join a new Loan Exposure Management Group as a credit trader. I spent the next 10yrs helping to manage Deutsche Bank’s corporate loan book across London & New York, specialising in pricing illiquid credit risk and trading CDS, options and loans. During this time I had to deal with the devastation and fallout from the Global Financial Crisis, the subsequent damage to markets and had a front row seat for the experimental path that Central Banks set us on.
When and why did you move to the buyside?
In 2016, I decided to make a change and move to the buy side. It was something I’d been mulling over for a while, I wanted to be closer to real money and ultimately see the benefits of my work feeding through to the underlying client. So, I took the opportunity to move to Deutsche Asset Management to help set up a new Fixed Income trading desk in London. DeAM were branching out from their main execution hubs of Frankfurt and New York and were looking to expand into London. This was an exciting opportunity, the role combined the process of building out a new trading desk but was also focused on bringing execution closer to the investment process through seamless integration with Portfolio Management. I really enjoyed the move, however, in 2018 an even more exciting opportunity presented itself at Royal London Asset Management -
RLAM were embarking on the roll out of a Central Dealing Desk (C.D.D) model for Fixed Income. The company was thriving with AUM having grown from £53bln in 2013 to £115bln in 2018, with a large focus on fixed income. The position itself encapsulated everything you could want from a senior buy-side trading role;
the ability to help build a desk, a close knit and well established investment team, a diverse suite of products and a desire to treat the roll out of the C.D.D as real opportunity to add value for the client. The chance to join at the ground level was too good to miss!
What were the biggest challenges you faced since your move to RLAM?
Rolling out a Central Dealing Desk is certainly a challenge in terms of bedding down procedures and processes, but there were solid foundations in place which meant we could focus on really shaping the desk. Despite the challenges, this has been a real opportunity for RLAM. If you look at the life cycle of a trade, given how compressed returns have become over recent years, execution is becoming increasingly important and more integral to the success of a trading strategy. Be it early involvement in the investment process, trade idea generation through to locating and sourcing new pools of liquidity - any additional edge we can get from a Centralised Dealing Desk can be leveraged to maximise returns and achieve the best outcome for our clients.
What has changed for the fixed Income trader?
When I originally joined the trading desk back in 2005, my manager at the time offered the following advice.. “the secret to being a good trader is not to mess up!” (not his exact words!). While this still holds true, the modern buy-side trader has to be multifaceted. Dealers are now expected to wear many hats so the required skillset needs to be much more rounded and complete.
For example, we need to be close to the investment process, be on top of markets, manage relationships with our counterparts and ensure we extract maximum value for our clients. However, to really go the extra mile we need to be at the cutting edge of the industry;
understanding and anticipating changes or developments in the regulatory environment, driving market structure change, pushing advances in efficiency & technology - we have to react and evolve quickly and this is a very different balance.
What do you see as one of the biggest challenges for the fixed income trader going forward?
We’ve been through an unprecedented period of low volatility, but with the end looming for Q.E, markets are going to be extremely challenging over the next few years. As we speak, cracks are starting to appear as we reach the business end of Brexit, geopolitical issues are coming to the fore once again, credit is under pressure as focus comes back to fundamentals...I could go on.
We’re now in a position where banks have reduced balance sheets, a lot of experience has left the market on the sell side, trading has become increasingly electronified, so if markets do turn then liquidity could be a real challenge. In short, if it gets choppy, buy-side fixed income dealers will need to be able to exercise their more traditional style execution skills.
What specific qualities do you look for in a buy-side trader?
Attention to detail is important, we work in a pressured environment and it’s easy to miss something if you’re not focused on the detail.
On the flip side, a sense of humour is a must if you’re going to survive - the ability to laugh and calm a situation is vital.
Next is client centricity. We work for the client and that should be at the heart of everything we do.
Finally, it’s integrity. This is still a people business and all you have is your reputation - treat people well, act respectfully and be true to your word.
What do you like about the Alpha Trader Forum meetings you have attended?
I don’t have much time to get off the desk so when I do, I need to make sure the time is spent focusing on the issues that really matter.
The Alpha Trader Forum’s provide a great format that drills down on topics that are current and important to the buy side community. The forum brings together industry leaders and provides an open format where ideas and concerns can be aired openly in a constructive manner. I always come away from an ATF meeting feeling like I’ve got a better handle on the topics discussed.
What do you like to do when you’re not trading?
When I’m not at the desk or at home being marshalled around by my young daughter, I like to box and I like to cook. Ironically, I’ve always found boxing to be quite calming! I think you can learn a lot about yourself when you get into the ring. Whether you’re on top and in control, or stuck on the ropes. It’s a lot like trading, you have to stay alert, understand your options and keep a clear head. Cooking, on the other hand, allows me to express my more creative side – as much as I enjoy the cut and thrust of the fixed income world, rolling my sleeves up and getting inventive in the kitchen is a great release!
Read the article in The Buy-side Perspectives: https://joom.ag/NN6a/p30