Deutsche Bank to beef up its Asia-Pacific equity derivatives unit

 

Deutsche Bank to beef up its Asia-Pacific equity derivatives unit. Deutsche Bank, the lender pulling back from some trading businesses, is beefing up its Asia-Pacific equity-derivatives unit as it looks to capitalise on expected demand for quantitative strategies from local investors. David Bruchet, formerly of Societe Generale, will join the German bank in Hong Kong as an index equity-derivatives trader at the end of January, said James Boyle, head of equities and co-head of global equity derivatives, who was hired from Citigroup in July. Bruchet becomes at least the sixth hire in the region under Boyle, who is putting in place his strategy to turn around Deutsche Bank’s fortunes in equity-derivatives trading.
The headquarters of Deutsche Bank is seen in Frankfurt. The German lender is beefing up its Asia-Pacific equity-derivatives unit as it looks to capitalise on expected demand for quantitative strategies from local investors
The headquarters of Deutsche Bank is seen in Frankfurt. The German lender is beefing up its Asia-Pacific equity-derivatives unit as it looks to capitalise on expected demand for quantitative strategies from local investors

Chief Executive Officer John Cryan is seeking to boost stock-trading operations while pulling back from other investment-banking businesses that are grappling with stiffer capital rules and the cost of settling legal problems. The strategy has yet to pay off, as the equities unit slumped in 2016 and lags behind the Frankfurt-based firm’s rivals.
“Clients have money to put to work in Asia after being on the sidelines this year, and Deutsche Bank has expertise in quantitative strategies,” Hong Kong-based Boyle said in an interview. Deutsche Bank’s equities trading revenue fell 25% in the first nine months of this year, worse than the 14% collective drop among nine of the biggest global investment banks, according to data from Bloomberg Intelligence. It was as low as sixth in Coalition Development’s 2015 rankings for Asia-Pacific equities, compared to first for fixed income. The desks in Hong Kong and Singapore will trade around the world, Boyle said.
“We are ramping up here as investor demand in Asia is increasingly for global products,” he said. “They also want more diversification and the US market is deep and liquid.” Global assets in quantitative strategy funds are on pace to grow to $1.2tn in 2019 from $265bn in 2014, according to research from Citigroup. Two smart beta funds – which look at factors such as low volatility or dividend payouts rather than market capitalisation – started by Goldman Sachs Group in September now manage more than $1.1bn.
In August, Credit Suisse Group hired Matthew Rothman as the head of quantitative equity research to build a global team of quants, while Axa Investment Managers recruited three Goldman Sachs bankers earlier this year for a liquid absolute returns fund. The trend bucks the broader move to cut trading staff amid underpeformance in traditional equity-derivatives products.  Global revenues were 27% lower at the end of the third quarter from a year earlier, as clients’ risk appetite waned and trading volumes remained subdued, Coalition Development’s latest data shows. Standard Chartered exited the business 12 months ago, while Commerzbank said last month it would spin off its structured equities business into a separate unit. At Deutsche Bank, sales from equity derivatives were “significantly lower” in each quarter for the year through June before improving in the third quarter of 2016, according to company presentations. Clients pulled back from trading, compounding other problems including “challenging risk management” and losses from securities that the lender held on its own balance sheet, the presentations show.
“Active management is challenging and risk-adjusted returns are superior from quantitative strategies, which can take advantage of volatility and market dislocations while also being more profitable for us,” said Boyle. Among Boyle’s other hires are Eric Jungers, head of synthetic equity trading for Asia Pacific, and derivatives strategist Lars Naeckter, who both joined in September.
Deutsche Bank also hired Benjamin Biette from BNP Paribas SA as head of equity structuring for Asia in August, and ex-Natixis SA executive Mederic Gehl started an equity structuring role in Singapore in July. Deutsche Bank also added Claire Arnaudo from BNP Paribas as head of multi-asset retail distribution, said Boyle, as the bank expands its retail structured products business.

Sources: QGN, Bloomberg, GT.