USD6 billion hedge fundBlueCrest Capital Management has hired David Phitoussi, director and single stock derivatives trader at Merrill Lynch in London, and is reportedly looking to build up a volatility trading business. Some see that as an unusual move: the strategy has not been among top-performers in the last two years, suffering because perceived risk across asset classes has faded.
Phitoussi, reached on his cell phone, confirmed the move and said he will start at the hedge fund in three months'. He declined comment on the detail of his role and on BlueCrest's plans.
Some market officials questioned why BlueCrest is interested in volatility arbitrage, citing the relative poor performance of the strategy. But one head of equity trading at a European firm countered that volatility has been picking up in the last few months (DW, 8/12). "It makes sense to me," he added, explaining BlueCrest is a large enough fund manager to provide the operational and risk management capabilities to support volatility arbitrage, which is more complex and expensive than a simple equity long/short strategy.
Volatility arbitrage funds can also be popular with investors looking to diversify an investment portfolio, explained another volatility trader, because they tend to be negatively correlated with equities. Dealers noted BlueCrest may also decide to run an arbitrage strategy across volatilities of a range of asset classes, rather than just equity. It may also decide not to take a long volatility position, noted one strategist, who said there is an increasing trend away from simply buying volatility.
Bill Reeves and Mike Platt, co-founders of the hedge fund in London, and Patrick Meyer, spokesman for Merrill, did not return messages.
