INSUBCONTINENT EXCLUSIVE:
Authors: JordanBy Alastair MarshIn an industry where power and influence are measured in dollars and cents, this may be the most exclusive
club in finance: The price of admission is at least $25 million.
It has no name and no board of directors but has a roster drawn from the
Members essentially become their own one-person firms, even firms within firms, by gaining a seal of approval to deal in the complex
products typically reserved for institutions that manage hundreds of billions of dollars
While no one keeps count, people in the industry guesstimate that the total peaked at no more than 3,000 a decade ago and has shrunk
considerably since the financial crisis
Months of interviews have yielded the identities of just 12 individuals who held the prize: an ISDA master agreement.
They have included
hedge fund titans Chris Rokos and Michael Platt, as well as whales at Deutsche Bank AG and Goldman Sachs Group Inc., which became clients of
their own employers.
In the $542-trillion market for over-the-counter derivatives, ISDA agreements set out the trading terms between two
Manuel de Souza-Girao, a former senior wealth manager at Deutsche Bank and Credit Suisse Group AG
Bloomberg Billionaires Index
The British co-founder of Brevan Howard Asset Management, who now runs his own hedge fund, was personally the counterparty on ISDA
agreements in 2013 when he set up a family office
That meant Rokos himself was on the hook if the trades went against him.
Platt, 49, who runs BlueCrest Capital Management, also previously
had a personal ISDA agreement, said people familiar with the matter
investment-management firm for wealthy individuals
built up in the finance industry to gain access.
Sofiane Gharred, 39, made his fortune trading credit derivatives
When serving out a non-compete period in 2014 before starting his hedge fund Selwood Asset Management, he signed an ISDA with Citigroup Inc
and traded the riskiest portions of credit default swap indexes, according to people familiar with the matter.
Gharred, who was born in
Tunisia and studied in Paris, declined to comment on his personal investments
Citigroup, an individual must have a net worth of at least $25 million, $5 million or more of which must be deposited in an account with the
bank, according to people familiar with the matter
Goldman Sachs and JPMorgan Chase Co
require greater wealth, the people said, although in most cases the guidelines can be tweaked for long-term clients.
A spokeswoman for
in California who retired in 2008 at 41 to raise his son and race Bugattis, had ISDA agreements with Citigroup and Goldman Sachs, according
to a person familiar with the matter
swaps and currency derivatives with the U.S
banks between leaving Pimco and joining Capital Group Cos
Hamalainen died in 2014.
Kieran Goodwin, the former head trader at King Street Capital Management, traded with an ISDA between leaving the
fund in 2010 and starting his own firm in 2012, New York-based Panning Capital Management, according to a person familiar with the
matter.
Hedge fund manager David Peacock also previously had an ISDA, according to people familiar with the matter
co-head of corporate credit at Cheyne Capital Management in London, declined to comment.
Wealthy individuals were something of an
afterthought for the bankers and lawyers that created the agreement for the International Swaps Derivatives Association, or ISDA, according
to Jeff Golden, a former senior partner at the law firm Allen Overy
He was among the authors of the original 1987 agreement and all subsequent updates.
Derivatives are not just for speculation, though
He entered into a 10-year interest rate derivative that required him to pay an upfront premium of about 4 percent of the value of the
mortgage, while the bank is required to pay him every quarter that a benchmark of interbank borrowing costs is above a pre-defined
level.
Filippa, who left the bank in 2016, declined to comment on how much he paid for his home
He said Goldman expected its staff to conduct their personal investments with the bank for compliance reasons, and that the firm allowed him
to tailor the contract to his specific requirements
people familiar with the matter
Rules created to prevent another crisis have increased capital costs for lenders trading derivatives that are not processed through a
willing to trade.
Billionaire real-estate investor Jeff Greene, who bet against U.S
credit-default swaps wagering on a collapse in that market.
Spurning an offer to invest with his friend, hedge-fund honcho John Paulson,
Greene put on his own trades and said he made a profit of about $800 million on a portfolio of credit-default swaps protecting against
declines in about $1 billion of mortgage bonds.
Management subsequently ruled against a broader rollout because it was almost impossible to
who ran a team tasked with marketing fixed-income structured products to high-net-worth individuals.
In some cases, bank employees have been
That was the case at Deutsche Bank, where senior executives, including Raj Bhattacharyya and Boaz Weinstein, had ISDAs with the bank while
employed by the firm.
Bhattacharyya, who remains with the German lender and heads its emerging-markets debt and foreign-exchange franchise
spokesman for the bank in New York.
Goldman Sachs has also traded OTC derivatives with a number of its senior staff
is one such example.
Wang, who now runs a macro fund in San Marino, California, said he was one of a number of staffers to have ISDAs with
signed a separate agreement with Bank of America Corp.
The set-up whereby a bank trades with its staff can create potential conflicts of
interest, such as when junior colleagues are leaned on to give their seniors a good price on personal trades, which can be processed through
the same desk as client orders, according to people familiar with the matter.
Former employees can also use their institutional knowledge
and relationships to get an ISDA agreement
example.
He set up a company in January last year to trade with his own money
Boltons Place Capital Management Ltd., which shares the name of a street in Kensington, has an ISDA with Goldman Sachs, according to a
person familiar with the matter
former derivatives executive at firms, including Citadel LLC, who now invests in the contracts for his clients at London investment firm
