Last year Schroders, the UK fund manager, underwent radical change after its head of trading left the role in May.
Rob McGrath, who was based in New York, oversaw 40 traders across equities, fixed income and foreign exchange. Also departing was Nick Robinson, head of fixed income trading, in London.
In response, the heads of desks remaining at Schroders stepped up to lead the asset manager’s global trading operations.
Robbie Boukhoufane is one of those leading the charge. Previously Schroders head of FX, Boukhoufane was named global head of fixed income and FX trading, combining the two trading desks together.
His appointment to the newly created role signalled that it was reverting back to having heads of individual asset classes, as opposed to a single global head of trading.
The TRADE Derivatives sat down with Robbie to see how he has pieced together fixed income and FX operations in Schroders overall jigsaw puzzle of trading desks, along with how trends with regulation, electronic trading, and sell-side changes are affecting his role.
How has the restructuring of Schroders’ trading desks gone?
RB: A lot of my time was dedicated to this restructuring in 2016 and Schroders’ senior management have been very supportive. From my perspective the role of the trading desk continues to evolve and, particularly for active mandates, our objectives should be aligned with that of our portfolio managers, which is to continuously look for ways to add value for our clients. This is why it is extremely important to have a high-level of collaboration between trading and portfolio management teams across the global business. It requires a certain skill-set to achieve our objectives of minimising trading costs, preserving alpha and, for some markets, generating alpha. I have also increased and strengthened the global trading team with a number of senior hires to compliment the growth and diversity of our fixed income business. My philosophy of having a hybrid of skilled traders and the right systems is key, but also having traders that are willing to embrace new technology and understand how to extract the maximum amount of value out of new initiatives is important.
How have you aligned the fixed income and FX desks? Has there been a change in strategy since?
RB: Some investment teams within Schroders use both fixed income and FX products to express macro views. There are many funds that trade cross-asset instruments, so it was a natural progression. There was already a large amount of overlap within the teams and we now have a diversified range of skill-sets. Some of the more liquid products on the rates side, such as government bonds, can have similar characteristics to FX in terms of how electronic trading is evolving. We have a combination of cross-asset traders and specialists in this area.
Has there been a change in strategy with a greater emphasis on electronic execution?
RB: This most definitely remains a theme and there are some similarities across the products, but there are also very different types of products which require specialist traders to handle larger transactions. For Schroders, we are a large active manager and a lot of our trades are larger than the average market size which often requires a different approach to manage those executions. For the more liquid products you essentially become more efficient via automation and, for the larger-size transactions, embracing new technology assists with deciding on the most appropriate execution strategy.
What were the major trends that your trading desk picked up in 2016?
RB: Liquidity analysis is an ongoing theme, especially for markets where fragmentation and more gaps in liquidity remain. In response to this, we continue to evolve and adapt to those challenges by being smarter in the way we access liquidity and having the right balance of evolving partnerships as well as taking advantage of the new initiatives coming to the market. In addition to this, having robust IT infrastructure is also vital in enabling the traders to become more efficient.
Another trend is data, which is an ongoing buzzword across the fixed income markets. The consumption and availability of data is becoming extremely relevant. Although accurate data across fixed income markets is currently a challenge, as it becomes more accessible the key here will be to consume and use the data in such a way that we can demonstrate and evidence how we use that data to improve performance and minimise transaction costs.
More generally, across instruments, electronic trading continues to evolve and there are a lot more sophisticated products coming to the market place across asset class. As an example, approximately 80% of our active FX trades are now executed through algorithms. There is also more focus on the use of algorithms in fixed income listed products. In OTC derivative markets more volumes are being traded electronically across IRS and CDS as the market moves towards a central clearing model with more non-bank liquidity providers growing in this area. There is no doubt MiFID II will push more executions towards electronic trading.
For the full article look out for the latest issue of The TRADE Derivatives.