The liquidity finder

AllianceBernstein’s global head of credit trading, Jim Switzer, is the man behind a landmark liquidity-finding tool that could soon become a standard technology in the investment management business.

By Sarfraz Thind July 14, 2017 10:41 AM GMT


Efficiency. That is the watchword for AllianceBernstein, says Jim Switzer, global head of credit trading, who believes it will cure the evil of illiquidity in the bond markets.

The company has been on an efficiency drive since Switzer joined in mid-2011. His background on the sell-side with Societe Generale and UBS Principal Finance, where he worked on the proprietary trading desk, helped him look through a broad lens for AllianceBernstein, at a time when the market was going through its most significant upheaval of the modern era.

“When I got here everyone in the market was talking about liquidity and how poor it was,” says Switzer. “Dealer balance sheets were down and electronic platforms were popping up everywhere. While we recognised the liquidity issue I thought the biggest problem was efficiency. Until we solved the efficiency issue we weren’t going to be able to solve the liquidity issue.”

For Switzer, who oversees some $135 billion in credit assets, efficiency encompasses three things: processes, people and technology. The company got straight down to it beginning with changing personnel on the trading desks. The idea was to transform trading from a pure clerical, execution model to one which required expertise in markets. The result was hiring experts in relative value, cash and synthetics who could buy into the trading process and offer new trade ideas and risk management for clients. Getting the people in was important given the wider changes the market has gone through in the last seven years.

“Because the dealer community is moving to a riskless model instead of widely broadcasting their positions dealers are making targeted, discreet phone calls to select institutions,” says Switzer. “We want to be on the receiving end of those calls so we need to make sure our traders are knowledgeable and empowered to act.”

The issue of liquidity has, of course, impacted AllianceBernstein’s fixed income business—like it has with the rest of the market. These days it is no longer possible to put an investment strategy first—the initial consideration is whether it is possible to source liquidity in the underlying asset.

“Before liquidity was at the end of the process—now before you do anything you have to think about liquidity first,” says Switzer. “The question is: ‘is it executable?’. Everything we are doing revolves around this process.”

Seeking ALFA

To solve the conundrum, AllianceBernstein has people from research, fundamental analysis, quants and trading all having a seat at the table. In total Switzer has a team of around 24 traders working under him. It has also been looking to go global - it currently has two traders in London – with a third due in the near future – and two in Hong Kong.

The move to a global approach allows the asset manager to be currency agnostic when executing trades. And, like many other asset managers, AllianceBernstein is trying to run the business as lean as it can. This leads to the next big change—technology.