UK
We’re a little late with this, but BusinessWeek published an interesting article earlier this week on Michael Platt, co-founder of BlueCrest Capital Management, London’s third largest hedge fund.
For those who aspire to follow in Platt’s footsteps, or to get a job at BlueCrest by astonishing Platt with their interest in his path to hedge moguldom, the article contains some helpful pointers, as follows.
Start young
Platt was introduced to trading by his granny, who “wasn’t like most grandmothers,” and was a, “serious equity trader.”
At the age of 14, he turned a 500 investment in an obscure shipping company into 1,500 and got hooked.
Don’t lose more than 3%
BusinessWeek offers the interesting revelation that BlueCrest’s 60 traders are heavily penalized if they lose 3% or more of the money they’re managing. If they lose 3%, their allocation of capital is sliced in half; if they lose another 3%, their capital allocation is removed entirely.
This is far more severe than at Brevan Howard, where traders are only subject to risk managers’ wrath once they lose 8% or more.
BlueCrest’s system appears fairly successful – since 2000 only six traders have been ejected for the 3% transgression.
Suppress your ego
Like Alan Howard at Brevan Howard, who’s subject to the loss rules imposed on staff, Platt himself operates under the 3% rule. Personally, he says he’s never lost that much: “Ego is how you lose money in this business. I put a trade on, and if it doesn’t start working straightaway, I respect the price action and cut it fast.”
Start out on a graduate trainee scheme in a major investment bank
Like most successful hedge fund managers, Platt did a stint in an investment bank.
He graduated in maths and economics from the London School of Economics (he begun by reading engineering at Imperial, but left when he got bored) and got a graduate placement at JP Morgan. At JP Morgan he was placed on the derivatives desk, where he traded interest rate swaps, and after several successful years was moved to the prop desk. Two years’ later, he set up on his own.
Work with wonderful colleagues
Platt appears to be allied to a hedge fund manager more talented than himself. His Brazilian partner, Leda Brega, achieved returns of 43% in 2008 and 9.4% between January and November 2009.
So 6% and you’re out? Why is BlueTrend still running in that case.
BS article.
@Jol – 6% and you get your capital removed and the situation’s reviewed by risk managers. After the review, I guess the risk managers give the capital back if there are extenuating circumstances.
@Jol – 6% and you get your capital removed and the situation’s reviewed by risk managers. After the review, I guess the risk managers give the capital back if there are extenuating circumstances.
Sarah, Editor, eFinancialCareers 14 mins ago
LOLOLOL…nice one
typical Sarah BS article
she should kill herself
Hey, thanks Ewde. I’ll bear that in mind.
I’m not sure what’s BS about this article. Platt employs a strategy of capital preservation and home runs. He is disicplined enough to keep his ego in check and cut a losing position. Pretty much the standard play from Market Wizards or anything over at Quantum Fund.
It’s not enough to say that a 6ft tall man can cross a river that is 4ft deep on average, because it’s not enough that he has his head above water on average – he needs his head above water at every point. Likewise it’s not enough to have great traders that return profit most of the time; they need to be able to withstand the drawdowns. This strategy is probably why BlueCrest still exists and Amaranth does not.
djm, u dont know anything about this business. its about making money. bottom line. keep reading the same sh*t articles that your friend Sarah reads. It ps me off that she gets paid for it
ewde – Whereas your comments show a deep understanding of the business and a contrary, yet thought-provoking, perspective to the financial media. Oh wait, no, you’re an idiot.
I’m not sure what’s BS about this article. Platt employs a strategy of capital preservation and home runs. He is disicplined enough to keep his ego in check and cut a losing position. Pretty much the standard play from Market Wizards or anything over at Quantum Fund.
It’s not enough to say that a 6ft tall man can cross a river that is 4ft deep on average, because it’s not enough that he has his head above water on average – he needs his head above water at every point. Likewise it’s not enough to have great traders that return profit most of the time; they need to be able to withstand the drawdowns. This strategy is probably why BlueCrest still exists and Amaranth does not.
LOLOLOL…nice one 2…blimey, we have very smart people around here
Ewde I’m sorry to tell you this but mate you’re a tw*t!
The article pretty much describes how BlueCrest BCI fund is run. 6% is YTD though so a trader that has made money during the year can lose more than 6% without being kicked out. If you do hit your stop loss you’re very unlikely to be recapitalized though and it will not be a call that can be made by the risk manager.
Ewde: I can’t believe your comments get by the moderator. Intellegent disagreement is absolutely fine: all views welcome. The personalisation of your comments is totally out of line. If you can’t be an adult, don’t try and argue with the grown ups.
what’s all the fuss about. Sarah wrote article, Ewde disagrees. Let him disagree if he wants to do that. Who cares what he, or she for that matter write?
so you have to have! money in the first place to make money, and or a degree, which means this is only for the privilledged few whilst the rest of us live in credit
you can get into LSE and follow the same pattern he did. What’s preventing you from doing it?
Just work hard man.
This article is the embodiment of exactly what is wrong with the global financial system – single minded focus on immediate short term profits. If the system can not tolerate even 3% downside then there is no way it can be aligned to real world value addition!