Wednesday, May 16, 2012

Ex-JP Morgan Traders Also Profiting From Iksil's Pain (JPM)

Following up on "The Man Who Beat Iksil and JP Morgan (JPM)".
From CNN Money's Term Sheet blog:

The hedge funds that are profiting off JPMorgan's bad trade
A number of funds run by former JPMorgan employees are cashing in, but not much.
Is Dodd-Frank, the law that is supposed to make the banks less risky, actually to blame for JPMorgan's huge trading loss?

Earlier this year, Neil Chriss, who runs hedge fund Hutchin Hill, said in a Bloomberg interview that he was looking to profit by buying up positions that the large banks might be forced to exit because of Dodd-Frank banking reforms. It appears he found one. Hutchin Hill is one of the many hedge funds rumored to be making money on JPMorgan's $2 billion trading blunder.

Star hedge fund manager and chess master Boaz Weinstein, who ranked 17 on FORTUNE's 40 under 40 last year, appears to be on the other side of the JPMorgan trade as well. Back in February, he told a crowd at a charity event that his No. 1 investment idea was to buy 10-year credit default swaps on the CDX IG 9, which are the exact type of CDS contracts being sold by JPMorgan's London whale. He told the attendees at the conference that the CDS contract was "very attractive" and was trading at a discount.

A spokesperson for Hutchin Hill and Weinstein's Saba Management declined to comment.

Wall Streeters who specialize in the CDS market say it appears that dozens of hedge funds have piled into the anti-JPMorgan trade. A number of the funds, including BlueMountain Capital and Lucidus Capital, are run by traders who formerly worked at JPMorgan. Perhaps that's not all that surprising. CDS contracts were basically created at JPMorgan more than a decade ago. So it makes sense that the traders with the most expertise in the market would come from the bank. But it's just another sign that many traders who are fleeing the big banks are coming back to haunt their old employers....MORE
One last note from last September:
Boaz Weinstein’ Saba Capital hires JPMorgan Prop’s Maitland Hudson
Not the same types of trades but firms can be flexible when it comes to job descriptions.