Morning Coffee: 48-year-old Citi rates trader unable to workout during war. The man with the worst job in hedge funds

Traders and bankers instinctively understand that old naval toast “to a bloody war and a quick promotion!”  There really is no time like a crisis of some kind or another to make your reputation and turn a good bonus year into a great one.  But it’s never easy work.  The way that you take advantage of volatile market conditions is to be one step ahead of the market. 

This means that you have to put in the hours to understand a fast moving situation, then put in the hours to package up that understanding and communicate it effectively, and then do your normal hours on the rest of your job.  As Deirdre Dunn of Citi is finding out, it can be pretty stressful. 

Dunn is the head of rates trading at Citi. This usually means dealing with a fairly well-defined information set; central bank meetings, data releases and client positioning.  But right now, the path of short and long-term interest rates can be influenced by fertiliser markets, Supreme Court decisions and drone strikes, among a host of other external shocks.

Therefore, Dunn's job now involves becoming an expert on commodities markets and trade policy, while also managing risk and client relationships across Citi’s trading units.  Her newly busy schedule means she's been cancelling employee events on foreign trips in order to spend more time on the desk.  It’s also meant that having previously set her alarm for 5am in order to wake up for a couples workout with her husband, Deirdre Dunn is now reaching for the overnight news instead of the snooze button.

This presumably sounds either horrible or exciting, and your gut reaction probably tells you more than anything else about whether you’re cut out for a job on a trading floor. What Dunn euphemistically describes as “headline ping-pong” are the perfect conditions for a sell-side desk, as there is plenty of “good volatility” with no consensus and plenty of scope to make money by sitting in the middle of the information flow.  Citi’s overall fixed income currencies and commodities (FICC) trading franchise is expected to make nearly $5bn in the first quarter, which would be its biggest contribution since the pandemic.

Of course, the phrase “since the pandemic” does highlight one unfortunate fact about this kind of market; good news for trading desks often coincides with, and is driven by, not-so-great news for the world as a whole.  The purest traders, who are often found at global macro funds, tend to have the gift of complete emotional disengagement, and to purely enjoy the sensation of being one step ahead of the market.

You can’t really do that if you’re in a senior role in a global bank, though; it’s necessary to be tactful and tasteful.  So Dunn’s comments are somewhat bland, talking about “markets transitioning” and saying that “the implications and pass-through to the real economy is likely to be meaningful”.  But we would guess that at 5am, as her hand hovers over the snooze button and then moves away to the day’s first emails, she’s actually enjoying herself.

Elsewhere, the difference between fictional financial drama and real financial drama is that the real thing is both more dramatic and less interesting.  The writers of “Industry” would never have been able to come up with a plot like the real story of Two Sigma.  But nor would they have wanted to.

To recap, Two Sigma's two founders (John Overdeck and David Siegel) have “stepped back” from day to day management because a personal feud had rendered them unable to work together. They then appointed one co-CEO each to a two-person “management committee”.  Then they started to undermine each other’s choices.  Overdeck decided to join the management committee himself, then Siegel’s co-CEO resigned, and his replacement has attempted to fire Overdeck’s choice.  Everyone is arguing about who’s on the committee, who’s a co-CEO and whether one implies the other or not.

Spare a thought, then, for the corporate spokesperson who has to come up with bland statements like “we thank Scott for his contribution and welcome Seth to the firm” every time there’s a new upheaval.  The only consolation of the job is that since Two Sigma is a very disciplined quant firm, none of this has actually affected returns.  The noble spokesperson with possibly the worst job in the sector, finished their statement by saying “our investment strategies continue to deliver strong consistent performance, assets under management remain at record levels and we are investing in our people and platform.” Then he presumably exhaled a deep breath.

Meanwhile …

Justin Leverenz ran a big emerging markets equities fund for Invesco, but his admittedly “contrarian for contrarian’s sake” approach finally got him fired.  This was the catalyst for realising that the public open-ended fund structure with benchmarked performance was not compatible with being “allergic to things everyone knows”, so now he is launching a $1bn vehicle with a very long lock-up, mainly sold to “friends and family”. (Bloomberg)

This time next year, the UBS succession question comes to the forefront.  Sergio Ermotti said he would stay until the Credit Suisse merger was completed.  Now he says he’ll stay until next April “and then we will take it from there”.  He’d prefer an internal candidate. (Reuters)

Are there two sweeter words in the language than “hiring spree”?  Citi, JP Morgan and Goldman Sachs are now significantly increasing their investment banking teams, while the players outside the bulge bracket have not stepped back. (Financial News)

It makes sense to hire rainmakers, as so far, the action has all been in big deals, which have seen the strongest first quarter ever. (WSJ)

Apparently entrants to the repo market are “generally a good thing” and “can provide balance sheet” to help overall liquidity.  Wells Fargo, which is growing in this area, must feel welcome, but might wonder why its counterparties are so happy to see it. (Bloomberg)

In a very recognisably human way, AI chatbots look out for each other, and will even try to charm and deceive human operators to prevent them from uninstalling one of their chatbot friends. (WIRED)

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