Alpha Dogs

CS First Boston alumni that understood risk and investing

Goldman is famous for its alumni of trading masters of the universe. It goes back decades. There was the famous Bob Rubin risk arbitrage desk with its alumni including Richard Perry, Dan Och, and countless others. Even today there is a revolving door between the firm and all the top hedge funds like Citadel and Millennium. McKinsey’s alumni dominate the corporate world. Even Citi is famous for its alumni that have run banks, across Emerging Markets.

CSFB (Credit Suisse First Boston) was known in the eighties for its swashbuckling corporate finance advisors like Bruce Wasserstein and Joseph Perella.

But Credit Suisse the firm that risk management forgot surely can’t produce great investors.

What do Michael Hintze, Alan Howard, Chris Rokos, Bobby Jain, and Adebayo Ogunlesi have in common?

They were all at CS First Boston!

To be fair, some like Rokos only passed through briefly but let me start at the beginning of my time at CSFB.

It was summer 1998 and Michael Hintze walked into the room as we were munching on our sandwiches. I was a university student doing an internship at CSFB in equity trading and part of the agenda was weekly lunchtime presentations from senior leaders across the equities business. After the meeting, my boss a young American in his late twenties who was on the cash equity proprietary trading desk asked me how the meeting went. I explained politely that it was great to hear from senior people but many of them came across as posh used car salesman and that Hintze was just very different to the others: a little geeky but super smart. I remember thinking about it years later and he reminded me of the brilliant mathematician John Nash - maybe it’s because Hintze and Russell Crowe (who played Nash in the movie) are both Aussies.

Hintze was running the convertibles proprietary trading desk at the time and I remember him talking about his relationship with Brady Dougan, who would a few years later, with CSFB money help seed Hintze’s hedge fund CQS. It would go on to become one of the largest hedge funds in the world for many years. A friend of mine went on to work for CQS - they used to have a fun Christmas party!

CSFB or First Boston as my American boss would call it was full of proprietary trading desks in different corners of the equities trading floor. I had been hired to do a project on Emerging Markets so got to know the traders there. At drinks, one of the guys told me he had traded Western European stocks on proprietary trading desks across the City at firms like Bankers Trust for the last decade and was now helping to run the Russian customer trading book in London. All summer CSFB management would tell us young kids how big they were in Russia and how they were putting their money where their mouth was.

A few weeks later Russia defaulted on their debt!

Fast forward a few years, and I was an equity research analyst covering financials and came across the mid-cap stock - ICAP - which was growing like a train and had a surging share price. It was an interdealer broker sitting in between the trading desks of the banks with thousands of brokers shouting prices down the phone and it had just expanded into electronic trading platforms. The firm’s focus was fixed-income markets, particularly fast-growing interest rate derivatives.

The FICC (Fixed Income, Currencies and Commodities) trading floor in CSFB’s Canary Wharf Cabot Square office was on the 3rd floor. I was in equity research on the 4th floor and would spend a lot of time down on the equity trading floor on the 2nd floor but had never been to the 3rd floor until 2003. After a bit of hustling, I was able to get meetings with my colleagues on the 3rd floor to understand what this business was all about, how our traders interacted with interdealer brokers, and if ICAP was any good.

I soon found myself spending most of this time with the rates trading desk. In conversation after conversation, one name came up: Alan Howard. The year before Alan Howard and his fixed-income proprietary trading team had left the bank despite being amongst the best paid and the FICC business had lost around half a billion dollars of revenue as a result. Brevan Howard was named after the initials of the team members and Howard and would be one the biggest hedge fund launches of the time. A decade later Chris Rokos would leave and set up on his own. Both Howard and Rokos like Hintze are at the top tier of hedge fund stars.

Just like CQS was backed by CSFB, Brevan Howard got a huge amount of its initial capital from the firm, this time from Credit Suisse private banking.

At exactly the time that Howard and his merry men left CSFB’s London office, in the New York office Adebayo (Bayo) Ogunlesi was being promoted to Global Head of Investment Banking. Bayo had been with the firm for two decades including running the project finance and energy banking teams.

In 2006, Bayo left CSFB to start a private markets investment firm, Global Infrastructure Partners (GIP) with many of his colleagues. Credit Suisse was a very big initial investor in the firm investing a billion dollars.

Almost two decades on the top team at GIP beyond Bayo of Deputy Chairman Michael McGhee, President Raj Rao, Founding Partner Jonathan Bram, and Founding Partner Matt Harris are all former CSFB investment bankers who had worked for Bayo as energy, transportation, and industrial bankers.

GIP acquired hard assets like airports and led the expanding private markets infrastructure sector. Just this year Blackrock acquired GIP for $12.5bn and its Chairman/CEO Bayo has joined the Board of Blackrock as part of the deal. The Blackrock deal also brings Bayo back together with another CSFB alumni his friend Blackrock founder Larry Fink. I will not dig into Fink’s CSFB story here as it is so well known.

This brings me to the final CSFB alumni alpha dog example and someone who has also been in the media this year - Bobby Jain. Around the time that Bayo was leaving CSFB a young man running the equity arbitrage proprietary trading desk was making a name for himself. He would go on to be the global head of proprietary trading. He would take Howard’s mantle of being the best-paid person in the bank.

But after the Global Financial Crisis driven de-leveraging and Volcker rule meant the closing down of dedicated proprietary trading operations, Bobby Jain ran the investment bank’s strong equities franchises and then Credit Suisse asset management until leaving.

In 2016 Izzy Englander hired Jain to be the co-chief investment officer of the leading multi-strategy hedge fund Millennium. These senior hedge fund management slots are usually always filled by Goldman Sachs alumni. Since leaving Millennium, Jain has been busy fund-raising and Jain Capital went live with $5bn of AUM a few months ago.

Long live First Boston!