Replete with ex-hedge fund professionals, seemingly immune to the Volcker Rule, and free to hedge risks and trade prop for the bank as a whole, their importance is indisputable. At JPMorgan, the so-called ‘Chief Investment Office,’ manages a portfolio of $360bn.
Needless to say, other banks have something similar. Take Barclays Capital Barclays, which has a ‘Treasury department’ run by John Porter, who drew the attention of the British tabloids last month following an allegedly drunken breakfast to celebrate bonuses.
If you want to work for Porter, or in a treasury team generally, you should be interested in a long interview he gave in 2006, before anyone had heard of Bruno Iksil, the CIO, or the financial crisis. Published in a book on hedge fund traders, it explains precisely what it’s like to work as a trader a bank’s treasury team, who John Porter likes to hire, and what John Porter is really like.
This is what you need to know:
“Barclays has…consolidated interest rate risk from various areas of the firm,” says Porter. “All of the firm’s interest rate risk, from the retail bank, the mortgage guys, the Barclay Card and so on, is transferred to Barclays Capital and I take on the majority of that risk,” Porter adds.
Porter describes himself as, “engaged in time horizon arbitrage.”
While hedge funds are held to short horizons by investors, his team is able to take a medium term view on market events as their trades are not marked to market on a daily basis, but can be held to maturity on Barclays’ balance sheet.
He studied at the Ecole Normale Superieure inParisand received a doctorate in psychology from the Sorbonne. He also has an undergraduate degree from Harvard and a Masters in International Affairs from Columbia.
Initially, Porter planned to go into teaching and research. He didn’t start trading until he was 35.
Thereafter, Porter spent several years as CIO of the World Bank, managing a $20bn global fixed income portfolio. Before joining Barclays, he worked for Moore Capital Management in Paris and another unnamed hedge fund in London. Between 1998 and 2006 he generated 30% returns (gross of fees) in BarCap’s Treasury office.
Unsurprisingly for someone with a PhD in psychology and a doctorate in economics, Porter thinks psychology is the crucial driver of the market.
This is the wrong question according to Porter. The right question is: “How does one embody the qualities to become a great trader.”
Porter says the most important of these qualities is discipline. Discipline is more important than idea generation.
Porter likes to hire people who have demonstrated discipline. People with an athletics or military background are good.
“The typical hire in an investment bank is not of interest to me,” he says. He doesn’t like MBAs or quant PhDs. He does like psychologists.
“There have been a couple of times when noting the full moon has been a good thing for my trading,” he says. “Trading is all about confidence….But you have to know why you’re confident.”
Porter describes himself as a, “semi-proponent” of the CFA, simply because “it’s a good programme which covers all areas of finance.”