JP Morgan prop desk - worst results in recent memory

Barclay Currency Traders Index
An equal weighted composite of managed programs that trade currency futures and/or cash forwards in the inter bank market. In 2005 there are 90 currency programs included in the index

1987 29.56% 1997 11.35%
1988 4.28% 1998 5.71%
1989 18.89% 1999 3.12%
1990 57.74% 2000 4.45%
1991 10.94% 2001 2.71%
1992 10.27% 2002 6.29%
1993 -3.33% 2003 11.08%
1994 -5.96% 2004 2.36%
1995 11.49% 2005 -2.78%†
1996 6.69%


Compound Annual Return 10.12%
Sharpe Ratio 0.41
Worst Drawdown 15.26%
Correlation vs S&P 500 -0.04
Correlation vs US Bonds 0.08
Correlation vs World Bonds 0.13
 
that's a difficult question when it comes to swaps and other off-balance sheet instruments because the precise amount of capital being used is unclear. moreover in most firms capital usage is monitored in a more macro way - say all of fixed income trading. also, firms net all their futures positions and repo/reverse books so it is never exactly clear who is using what
 
Quote from toc:

The question is how much average returns do these prop traders produce...........from the barclays CTA index we find that average for all the CTAs ranges from 8-12%. Do the Ivy Leagues have any different figures, given the fact that they have much powerful resources than average CTAs..............you can run a CTA shop with $1K monthly expenses, just to make a point.
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Prop traders have different "risk profile" than fund managers and CTAs. CTAs and hfs are pool of capital from investors wanting a return on their investment.

Whereas at most i-bank prop traders are surprisely closer to what most people on this board know as "prop firms" a la Echo, Bright, Assent. I mean seriously!!!

I-bank prop traders are allocated "risk capital" and have such risk limits that grows over time as their size grows over time and their performance. But they are not a fund in a typical sense that they have to make a ROI. Their BENCHMARK is their COST OF CAPITAL, which for big institutions is probably LIBOR or a LIBOR+small basis points.

Obviously, i-bank prop traders employ sophisticated strategies, have quants helping them, and near unlimited capital. But conceptually, they are no different than Bright. Except there's no deposit necessary. LOL! And huge salaries and bonuses.

I mean since there's a mad rush into hfs nowadays. A lot of the good prop traders are leaving ibanks to go to hfs. But not all of them are adjusting well according to a recent WSJ article. Most of them think like working at i-bank. Hf investors have different expectations than their bosses and risk managers.


mistrader
 
I would like to read some books on IB. Are below books good?
i) The Business of Investment Banking by K. Thomas Liaw
http://www.amazon.com/exec/obidos/t...103-5483230-4610260?v=glance&s=books&n=507846
ii) The Investment Banking Handbook (Frontiers in Finance Series)
by J. Peter Williamson
http://www.amazon.com/exec/obidos/t...3/103-5483230-4610260?_encoding=UTF8&v=glance
iii) Leading Investment Bankers: Heads of Ibanking from Merrill Lynch, Deutsche Bank, Salomon Smith Barney & More on the Art of Investment Banking, Mergers ... & More (Inside the Minds) (Inside the Minds)
by Inside the Minds Staff
http://www.amazon.com/exec/obidos/t...2/103-5483230-4610260?_encoding=UTF8&v=glance
iv) Doing Deals: Investment Banks at Work
by Robert G. Eccles, Dwight B. Crane
http://www.amazon.com/exec/obidos/t...3/103-5483230-4610260?_encoding=UTF8&v=glance

Any advice? Are there other good books out there? thx.
 
You can read a tonne of books, but working for one of these behemouths for a year or two, will give you more insight.

But unless you went to the "right" under-grad, grad school or have significant family money at one of them, these jobs are basically unattainable by normal people. Working there and being their slave for a few years is the other route.
 
so what happens when a bunch of i-bank traders get made redundant and they go down the road to trade in an arcade?

does anyone know?

can they cut the mustard without the credit lines & their own money is in the book?
 
imho, its a very hard transition to go from being the guy who starts the wave, to catching a wave, if that makes any sense.
 
Quote from tomcole:

imho, its a very hard transition to go from being the guy who starts the wave, to catching a wave, if that makes any sense.
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perfect sense - thats why i asked the question!!

:)
 
accurate, excellent posts johnself

just one thing, in addition to carry trades fixed income guys do convergence trades a la LTCM, convertible arb, MBS and CDOs they are all basically convergence/mean reversion trades
 
Rumor on the CBOT floor that one of JP's big prop traders was short on the order of 200K Ten-years into the whole rally last couple months. Slowly covered them but cost couple hundred million. Was also short Eurodollars. This same guy put on a bunch of 1x2's in the Jan, Feb, and March option expiration cycles earlier this year in the Ten-year note and made a killing because of the low vol environment. Anyone else hear anything on this?
 
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