Rob Grillo and Mike Cash, two veteran Credit Suisse First Boston proprietary traders, have left the firm to help form Black River Asset Management, a wholly owned interest-rate arbitrage trading subsidiary of giant Minneapolis commodities trader Cargill, Grillo says. He declined to comment further and Cash had left the firm and was unavailable to comment. An individual close to the fund says it will likely launch with nearly $1 billion in capital and will probably begin trading in the late autumn.
Grillo and Cash will be part of a team of nine principals, with the balance coming from Cargill Financial Markets (CFM), Cargill's trading subsidiary, including bond market veterans Jeff Drobny,Steve Pumilia and Gary Jarrett. At CFM, Pumilia is the desk's credit trading chief, Drobny runs all interest-rate arbitrage and basis trading activities and Jarrett runs the entire group. The three did not respond to phone messages or e-mails seeking comment.
The individual close to the fund says Cargill is launching the new fund for balance sheet reduction purposes given its heavy reliance on short-term borrowing in the commercial paper market, stressing that it will be 100% owned by Cargill.
Grillo and Cash bring high-profile resumes to the venture. Prior to joining CSFB's prop desk in June '02, Grillo was the founding senior trader of Deutsche Bank's cross-rates group. He had also spent four years, 1995-99, at the III hedge fund in West Palm Beach, leaving after the fund got into trouble after the 1998 Russian debt crisis. People familiar with Grillo's trading say he specializes in arbitraging mis-pricings in all rate sectors, specifically swaps, options and euro-dollars. Cash had run an internal hedge fund at Prudential Insurance prior to joining CSFB's prop area, and prior to that, had run government bond strip trading books at Salomon Brothers and Donaldson, Lufkin & Jenrette. Cash is said to specialize in Treasury rate arbitrage, especially in using futures.
Mark Pattinson, who was recently appointed head of prop trading at CSFB after former chief Matt Zames was made head of U.S. swaps trading (BW, 5/4), declined to comment on replacements for Grillo and Cash. With their departure however, a CSFB insider acknowledges that "Pattinson will have to do something pretty rapidly, since they [Grillo and Cash] were his last two senior guys." A person familiar with the CSFB prop department says Pattinson is a more macro, directional trader, as opposed to Grillo and Cash's inter-sector arbitrage style, and will likely seek traders along these lines.