Getting out of prop- macro


Curious on responses. 10 years experience trading everything, but mostly yield curve. Also direction rates, snp, oil, gasoline, individual equities in personal account.

I pretty much failed at interviews coming out of school along with having a resume with limits (engineering 3.4, top-20 school, 1520 SAT).

But I came out in 2007 and ended up joining a prop-macro shop. Did very well for a long-time; multiple years with 1+ million compensation (which also came with favorable tax rates). Last two years have been tough. Started 2015 up 105% first half of the year; then I had my first losing stretch of my entire career that last about 9 months. Ended that year up 20% and by the time that streak ended gave back about all of the 2015 gains. Since them I've stabilized my business, but I think prop-macro isn't a good space to be in going forward. For really 2 reasons - Central Banks have gotten much better at running macro policy so I'm predicting fairly stable interest rates. Think 2% - 3.5 on 10's for a very long time. Second the algos have eaten up the easy daily trades. Those easy scalps were basically the carry in prop.

My firm has shrunk by 75-85%. I still work there. But its boring not having a full trading desks. The firm hasn't failed because of bad manager; but I think its clear prop/hft is consolidating and interest rate focused is the worst spot. Seems like 3-4 places are surviving. GS is freaking out of FICC performance.

How should i position my career? Everything in my background makes me believe I'm good at the trading game. But staring at screens for 10 years does get boring. My engineering skills and higher math skills have obviously degraded; though logic, and other skills have improved. How many guys at 32 have seen a full market cycle and were involved in it?

I haven't put a lot of time into networking. Created a linkedin profile for the first time a month ago. I was much more on the track of doing prop for 10 years and then starting my own fund. If anyone has seen the Hugh Hendry's recent interviews you would understand why I think that route is dead.

I had a phone interview from linkedin with a headhunter for $15 billion fund that is mostly long short but looking to add some macro managers - but I think having poor performance this year and never managing size turned him off from pushing me for that position. A firm like that I think would be the best bet if I want to stay in trading. A place where there is a small macro group, but a bigger equity group. As I'm bearish on macro trading (demand side of the economy) but equity guys should still have a lot of trading opportunity (supply side of economy when the economy is stable).

I have some thoughts of leaving. One of my best friends dad is C-level and Vice chairman at a 100-200 billion company. So could probably get into a corporate role. One of my old roommates is from a top 20 mexican family so they run a real estate firm (own a couple towers). So not a lot of networking, but I do have some people who respect me. Then there's getting in thru girls. Had a gf tell me she would just text top 5 hedge fund manager she's met ( I know which 30 year old he bought a condo for; probably a few). I have one friend I see once or twice a year that owns a PE firm (About 1 billion). But I've never crossed into professional from social. And not sure how my skill set would apply. He did invite me to join him on a miami trip after sending him a few text recently.

Is it worth getting a MBA in my position? INSEAD interest me a lot, but mostly because I'd want a 1 year program and living in Paris sounds fun. Or it better to do part-time booth and keep working?

I would call this rambling, but I have not thought much about my career in a decade. The only connections I have are social and not professional. And realistically I am not a believer that FICC trading is a good spot to be long-term.

Comments (14)

Oct 11, 2017 - 10:52pm

Have you considered starting your own fund? If you had multiple years with massive pay-outs it sounds like you had good performance for many years with a solid track record? You should have some money saved up to seed yourself some initial capital or at least join a different prop shop. If you raise 10 mio (some of your own) in assets and charge 1% that will be at least enough to get by.

Oct 18, 2017 - 2:34pm

I don't know your trading style on rates - but it sounds like a good chunk of trading was arbitrage based which I assume performs well with volatility. Markets are cyclical as you probably know and volatility will return as vol sellers will find themselves wrong one day and re-allocate out of those strategies - I can't say that will happen 1-day/1-mo/1-yr/1-decade from now but I think it comes back.

Oct 18, 2017 - 7:15pm

I'd love to hear other ideas about this as well. I've been in prop for about 4 1/2 years. It's been ok for me so far, but losing interest in it and my strat is stuck in a rut getting from "grinding it out" and "doing well". Been looking in to HF, either trading or something analyst level to start fresh and at least use these skills for something.

I'm over 30 as well. Got a late start because of spending time in military before school. Top...150 school lol, maybe top 100...

Nov 4, 2017 - 10:19pm

My guess is you are in trouble. Prop takes volatility you need a high amount of transactions. Now 2002-2007 wasn't great for that and then the guys who stuck it out had a couple years to make retirement money. Question is will we hit another cycle like that. My bet is on not. Crypto guys might get that vol....but outside of that I think Cb's have improved at running a stable growing economy.

Nov 4, 2017 - 10:17pm

I saved a lot. Not enough for upper class family in a major city. Enough for flyover country or North Carolina etc. Or retirement and becoming a bartender in tulum enough.

I guess I want to be productive and to do anything else might take a pay cut (plus trading on the side). I mean when I'm 50 do I want to be retired or contributing somewhere.

Oct 19, 2017 - 11:39am

I have negligible trading experience, but I'll offer my 2 cents....

You are young, have a track record of success, and are financially independent. Don't go for roles or degrees that don't lead to fulfilling/challenging work. I'd reflect on what strategy/industry you'd like to focus on or what problem(s) you'd like to solve (regardless of scale).

Take inventory of all the expertise / knowledge you've developed and see if you can apply it to anything you're passionate / curious about. If that fails, all the economic reports I read say that: the Eurozone crisis will probably explode next year, as ECB is the only real bidder; Private equity is going gangbusters with new fund growth and capital raised. Follow the $.

Edit: or trade equities and equity options

Nov 4, 2017 - 10:23pm

I agree with a lot of what you say.

I think the European cental bank has the go ahead to follow the gameplan created by the federal reserve. So i do not expect another european crisis (despite spain). Weidsman was always the problem there he wanted tight money always. But he's been discredited so no more european policy failures. Serious since adopting QE and the like why would the ecb go back to policies that led to crisis?

Nov 6, 2017 - 10:13am

The ECB owns 40% of Eurozone government debt. The Fed never reached the levels of ECB’s QE program so there is no comparison with the States. The situation in Spain is destroying confidence and has led to heavy selling. Plus, ECB is already holding 2.3 trillion and member states can't fund spending without them (unless they accept much higher rates ). Either the ECB continues to grow its balance sheet to support member countries, or those countries try and raise from markets. Germany will only tolerate strong Euro policies and will likely demand reduced purchases/letting bonds mature. That means member state yields go up, exacerbating the fiscal crisis.

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