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Morning Coffee: Inside the cut-throat world of hedge fund trading

Profit

Chris Rokos very rarely made a loss during his time at Brevan Howard. In fact, he made a combined $4bn for the hedge fund in the eight years prior to 2012, with one minor ‘blip’ (going $12m in the red in 2010), before surging back with a $1.27bn profit for the Brevan Howard Master Fund in 2011.

However, coincidentally or not, before deciding to move on in June 2012, Rokos made the worst loss during his time at Brevan Howard, or around $383m. Brevan Howard, like most hedge funds, is intolerant of underperformance, but here it seems unlikely that Rokos was shunted towards the exit as he was consistently marketed as the firm’s “star trader”. The only reason these figures are even coming to light is because Rokos is fighting an agreement he made with Brevan Howard to stop him managing external money until 2018 and they have been filed in court documents.

What they provide is a hitherto unseen insight into the profits and remuneration at the notoriously secretive hedge fund. Rokos personally made $900m while working at Brevan Howard since co-founding the firm in 2002, and is currently being paid $72.97m in yearly payments due to him as a retired partner of the firm.

Suffice to say, Rokos is unhappy with the arrangement suggesting that it is “unreasonable” and will prevent him from working for “one quarter of his remaining career”. More pressingly, perhaps, Rokos’s professional reputation would be “irreparably damaged”, he claims in the court documents.

Brevan said that Rokos’ position gave him “direct access to an ongoing contact with the limited pool of investors and potential investors prepared to make substantial investments through a hedge fund.”

Meanwhile:

Paying investment banking analysts more won’t make them more attractive to the graduates they want to hire. “In their eyes, going into tech is a way to remain among the cultural elite without selling your soul.” (New York Magazine)

Pictet’s first ever public results reveal a bank in rude health, poaching clients from competitors (Bloomberg)

Working for Wells Fargo’s tech team: Some engineers are exploring whether Google Glasses could help tellers identify bank robbers or whether customers can use smartwatches to authorise payments. (Financial Times)

The Goldman Sachs partners to drop out this year (Bloomberg)

US investment banks are having to get to grips with cross-border deals (Financial News)

“Some of the cleverest minds in the country are devoted to activities that are actively damaging the goals of effective regulation and honest and transparent accounting. Arbitrage is a significant contributor to the trading profits of financial institutions.” (Financial Times)

Related articles:

Goldman Sachs cutting at the top, bumping up at the bottom

Investment bankers not welcome at Jackson Hole, JPMorgan’s equities hiring spree

2014 analyst bonuses fall to a mere $55k, UK hedge fund bonuses slip by £127k in two years

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