Thursday, 24 July 2014
Last updated 3 hours ago
Oct 10 2012 | 1:03pm ET
Fahad Roumani is making JPMorgan Chase's decision to try to hold on to its proprietary trading desks by moving them to a new alternative asset management unit look good.
The credit trader's hedge fund, launched last year with $350 million in JPMorgan's capital, is up 14% this year. And that's helping the bank raise the money it needs to hold on to Roumani as it begins to redeem its investment to comply with the Volcker rule, which strictly limits the amount of a bank's capital it is permitted to trade.
JPMorgan pulled a quarter of its money from the JPS Credit Opportunities Fund this month. The bank will pull all of its capital from Roumani's fund by the middle of 2014.
"JPS has always been totally supportive of us," Roumani told Reuters. "We have an economic agreement with JPM which is pretty attractive [versus] the seed agreements we would have got outside of the bank."
Those inducements, however, weren't enough to keep the bank's other top prop. traders: Both Mike Stewart and Deepak Gulati, initially reported to be sticking with the bank like Roumani, have left to found their own hedge funds. But Roumani said his entire 20-person team had stuck with him, despite other new regulations that will force deferrals of large amounts of compensation.
"Generally, the whole hedge fund industry is going to move towards more deferred remuneration," Roumani said.
Roumani's fund currently manages about $500 million; he plans to close it at $1 billion. He credited his fund's bets on European bank derivatives for at least some of his success, adding, "periods of market volatility have been better for us than benign periods."
"The more volatility you get it's just inconceivable that everything will move together," he said. "This creates opportunities to put shorts on companies you know are going to be reporting pretty bad results in a couple of weeks."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…