Gen Re Securities, a derivatives and securities dealer which announced Jan. 28 a plan to close down, laid off approximately 60% of its global staff on Thursday, according to a company official. The staff came from all areas of the firm, including interest rate, credit derivatives, equity options and foreign exchange options traders.
About 150 professionals have remained on board to unwind and manage the risk on trillions of dollars (notional) of derivatives positions. A former employee said this will take up to several years. He added that Gen Re was not a large directional player so the risks are correlation and delta risks and it is not possible to just sell these in the same way you would sell a long bond position. In addition to the traders who have stayed on is a small team of back office, compliance and legal staff.
The former employee said the decision to close the operation in January came as a complete shock. He added that Gen Re Securities made a profit in 2001, had a pipeline of deals for 2002 and did not make a net loss on Enron. He speculated that the securities firm was sacrificed to cover a USD1.27 billion pre-tax underwriting loss BerkshireHathaway paid to General Re.
Mark Byrne, chairman, will continue working for Warren Buffett running the USD800 million West End Capital hedge fund in Bermuda.
Axel Horster, spokesman for GeneralCologne Re, the trading name of General Re, in Cologne, declined to comment.