A Trader’s Train to Wall Street, Connecticut

[Andy]

This article from NYTimes documents the arrival of towns across Connecticut as emerging financial centers, specially among hedge funds. If you plan to find work at hedge funds after graduation, this is something to keep in mind.

By MICHAEL S. SCHMIDT
Published: August 4, 2006

http://graphics10.nytimes.com/images/2006/08/04/business/04reverse.xlarge1.jpg

Thousands of young financial workers stream into Grand Central Terminal every weekday morning.
But many are not on their way to offices on Wall Street or in Midtown. Instead, they are crowded into trains for Greenwich, Conn., which has emerged as the home of the ballooning hedge fund industry.
The center of power in finance has shifted in recent years, and in one sense that shift is geographical. Some of the most powerful traders in the market can be found miles away from Wall Street, in Greenwich, Stamford, and Westport, Conn.
“If you look up and down the train line in Connecticut you will see all the hedge funds concentrated right along the line,” said Thomas Torelli, a corporate real estate agent in Greenwich.
Those funds are there because their founders and top managers live nearby. But thousands of their employees do not and as result do what to the rest of Wall Street is a reverse commute.
The trains leaving Grand Central between 7 and 8:30 a.m. are packed. Most seats are taken and conversation is sparse. Unlike Wall Street commuters, many are not wearing suits. Yet like the Wall Street crowd, some are working furiously on their BlackBerrys and laptops.
A little less than an hour later, when the train rolls into Greenwich, workers stream out of the train and walk to their nearby offices.
Greenwich is quiet, peaceful and clean,’’ said a young hedge fund employee on the train who lives in Manhattan. “But I am 24 and single — I couldn’t imagine living in Greenwich.”
He spoke on the condition that he and his firm not be named because he was not authorized by the hedge fund to speak to reporters. Many other commuters declined to comment for the same reason.
Hedge funds are notoriously secretive organizations. They will not disclose who their employees or investors are, much less their strategies. Now, apparently, how their employees commute is off limits, as well.
Still, it is clear that one of the most important factors for the thousands of hedge funds located in Connecticut is to be within walking distance of the train station, Mr. Torelli said.
Hedge funds started to grow like weeds around here and drive the real estate market from the mid-1990’s till now,” he said.
Metro-North Railroad estimates that the number of commuters from Manhattan to Greenwich increased 150 percent as of last fall from 10 years ago, and 170 percent to Stamford.
The president of the Greenwich Chamber of Commerce, Mary Ann Morrison, said she also began to notice the number of commuters from Manhattan starting to grow about five years ago.
These hedge funds, the staff they need are young ones who still have stamina and still want to be part of the city, so they do the reverse commute and get off here in Greenwich,’’ she said. “If they live in Midtown it’s no different than commuting from the Upper East Side to Wall Street.”
The increased popularity of Greenwich has sent already high corporate real estate prices higher. It has created a growing finance industry in a town already known for its wealth.
Prime office space that was priced at about $50 to $55 a square foot before hedge funds began to expand in Greenwich five years ago is now running as high as $80 to $85 a square foot, Mr. Torelli said.
Top-line office space in Manhattan can go as high as $100 a square foot and the average price per square foot in Midtown Manhattan runs around $40 to $50.
During the day, many hedge fund employees do not leave their offices. For lunch they use Seamless Web, an online food directory that allows workers to place orders for delivery to their offices.
If they do get to walk outside, they can stroll Greenwich Avenue and has stores that sell high-end goods.
At least for me I appreciate the extra space and the serenity that Greenwich offers,” the 24-year-old hedge fund employee said.
Manu Bangia, 23, works as a technology consultant for hedge funds and spends two days a week working in Stamford. His commute from Jersey City can take four hours.
When he first started work, Mr. Bangia said, “I expected Stamford to be in the middle of nowhere. But you don’t see tumbleweeds there.”

[frankm1342]

My friend just took a job in Stamford for one of the more famous hedge funds. He drives in everyday for a 7am start and leaves relatively early (maybe an hour or so after the market closes) - but when he gets home, his boss expects him to log back on after relaxing for an hour or two, and stay on doing work for the next several hours. He is also expected to work on weekends (from home).

[alain]

My friend just took a job in Stamford for one of the more famous hedge funds. He drives in everyday for a 7am start and leaves relatively early (maybe an hour or so after the market closes) - but when he gets home, his boss expects him to log back on after relaxing for an hour or two, and stay on doing work for the next several hours. He is also expected to work on weekends (from home).

What does it do for the Hedge Fund? How is his compesation going to be?

[Andy]

but when he gets home, his boss expects him to log back on after relaxing for an hour or two, and stay on doing work for the next several hours. He is also expected to work on weekends (from home).
Is it worth it, Frank? Are hedge funds more attractive than investment banks because of the pay? If so, by how much? I have no knowledge of the inner workings of both so can't really make an educated guess.
When I was in graduate school last year, I had a recruiter trying very hard to get me an interview with the guys at D.E Shaw. It didn't go anywhere but the experience somehow increased my interest in the quant/financial jobs and I started looking seriously into a career on Wall St after that. A friend of mine who got a Math PhD last May also took the Science of Finance class told me about the course. He is working on the Street now. I took the course and you guys know how it turned out. :D

[Bridgett]

Frank -- it sounds like your friend has a terrible life style (no life at all). I would have to settle for less money if necessary.

[frankm1342]

He started with Goldman as an analyst (did his MBA at Stern I think). Then he became an analyst with Lehman for their Neuberger Berman division (the hedge fund group). He got a bad bonus and then got a call from a headhunter for this hedge fund to be an analyst for Retail names. I dont know what his comp is but he signed a 2 year contract with them. Based on knowledge of other compensation for people in this type of role, I would not be surprised if he had a total package of $250K to $400K.

My friend's lifestyle is OK - he still makes time to hang out with friends when he can and I'm going to his wedding this weekend. Investment banking and hedge funds will be just as bad because they compete with each other in many ways. I feel like hedge funds are probably worse because of the way the compensation structure is. With a hedge fund, they take a % for assets under mgmt and then a % of the profits (usually 20% but this fund takes 50% I think). However, if a hedge fund is negative for the year, they first have to break even the following year before taking any profit. I think a lot of people leave I-banks to start or go to hedge funds because there is more potential to make money, but probably more risk. And that is saaying something considering that working in i-banking is risky to begin with.

[Andy]

I would have to settle for less money if necessary.
Agreed. I love money but won't sacrify my family, friends and my health for the green stacks. Balance is key. I love a long and enjoyable career, not one that I have to work 16 hours a day, 7 days a week for the first 5 years and then spend the rest of my life laying in a nursing, hospital somewhere.
But again, anyone knows if we can achieve balance in this field? Or are we going into this battle mentally and physically ill-prepared?

[Peik Looi]

Perhaps we can create a thread on the life of a ___ (e.g. credit structurer, financial analyst from a working person's perspective, see those listed in the various MFinMath/MFE websites) and discuss the scope of work, and if possible the hours to pour, quite literally (after reading the article).

I tried to access Baruch's http://math.baruch.cuny.edu/masters.html to get the list but server's down.

[frankm1342]

With regard to time and money, every job is different. In my job - Retail Equity Syndicate - if there are no deals going on, then it is a 7:30 to 5pm day. The money is good but each firm is different - the best situation in my world is if you are Retail Syndicate but your bonus is part of the I-bank's bonus pool. Citibank does it like that from what I've been told. BofA, where I am, does not. My counterparts on the institutional side, work much longer hours than me and get paid a lot more. For example, my supervisor's counterpart on the institutional side makes $1MM+ (and he doesn't have an MBA or anything!). Analysts and others in i-banking put in long hours - it's just a fact of the job. That's what you do to make a few hundred K or more per year. I think traders work more regular hours, but it is harder to get those jobs and the skill sets are different.

[maxrum]

Are hedge funds more attractive than investment banks because of the pay?


While working in a small hedge fund you will have to do many various tasks. As a result your job will be not so boring. If you work for a big company like Goldman, they will assign you a certrain task to do, and it's possible that you will be doing the same stuff over and over again for years. It sounds boring, nevertheless they pay well. So, it's always a choice :)

[Andy]

Perhaps we can create a thread on the life of a ___ (e.g. credit structurer, financial analyst from a working persons perspective, see those listed in the various MFinMath/MFE websites) and discuss the scope of work, and if possible the hours to pour, quite literally (after reading the article).
Good idea, you can find those "My typical day at work" postings from many of those IB websites. From what I heard, those are glorified stories, not ones to expect.
A better idea is to hear from our alumni, those who are working in many different positions, fields and companies. We will have our alumni come back to our Quantnet and merge with us soon. Then you can benefit from the wealth of knowledge they bring.
Among those took Calculus refresher with us, we have Mike Lee who is a trader at CSFB. He is working there with Phat Loc, our alumni, also a trader there. Mike told me that they have lot of PhDs doing the programming for them. Wonder where I fit in? :smt017
So I guess the moral of the story is don't expect to get big bucks if you are not prepared to work long hours, sweat and tears. The pace of our program is doing us all a great service....I'm loving it. \:D/

[John]

Awesome thread.

I have heard that for an jr analyst joining a new team, he/she would be expected to come in no later than 7:30am in the morning and stay until around 8:30 to 9:00pm. These are just the normal hours. When there's a deal ready to be finalized, you might need to stay in the office until past midnight, for maybe two weeks straight!

The frequency of this sort of the extreme events depends on the products you are dealing with. In fixed income, a deal might take as much as 2 or 3 years to be put together, so you still need to show plenty of 'face time' as a norm but not to the extreme degree that was just ilustrated. I think the closer you are to the front office (except trading) the longer your hours will be.

[alain]

My experience is you need to put long hours to make money. I have a friend who is a trader at a big hedge fund. He used to get to work between 6-6:30 am and leave at 6 or later when he started. Now, he said it is better because he gets there at 7 and leaves around 5.

When I worked close to the desk, I used to be there at 7. I did systems so we needed to be there early to make sure everything was ready. If there was a deployment, we used to stay until midnight or after. Weekends work was also routine.

[Andy]

My experience is you need to put long hours to make money.
I would keep this in mind. How is the personal vacation like at IB and HF, anyone knows?
I still remember reading from Derman's My life as a Quant that his management looked down on him when he tried to take the vacation during one of the hectic periods. And from his writing, everyday is a hectic day. So if someone takes his/her 3-week (or 4-week) vacation, people will look at him like a slacker? :smt018

[maxrum]

I still remember reading from Derman's My life as a Quant that his management looked down on him when he tried to take the vacation during one of the hectic periods.

He was trying to get two weeks vacation which officially he had the right to take. But on the Street it was considered as a bad manner to take more than one week.

[Andy]

While working in a small hedge fund you will have to do many various tasks. As a result your job will be not so boring. If you work for a big company like Goldman, they will assign you a certrain task to do, and it's possible that you will be doing the same stuff over and over again for years. It sounds boring, nevertheless they pay well. So, it's always a choice
He was trying to get two weeks vacation which officially he had the right to take. But on the Street it was considered as a bad manner to take more than one week.
Is this from real-world experience, Max? :mrgreen:

[frankm1342]

I have not had a job yet where taking vacation was frowned upon or discouraged - I've mostly worked in Equity Product Management and Syndicate. Even my Managing Directors take vacations. The big thing on our desk (I sit with the bond traders and best execution) is giving people grief who arrive late - meaning after 7:30am. Also, people who take lunch for an hour away from the desk. Everyone eats at the desk. Sometimes I take lunch with friends away from the desk and have to hear it from everyone all afternoon. On a desk, there is no privacy and people are very vocal!

[maxrum]

Is this from real-world experience, Max? :mrgreen:

This is from Gus, after the orientation :)

[RussianMike]

I have 24 days of vacation now (not working on the street though). I do use all of them and plan on doing this (will def. need days for the program). I have taken 2 week vacations at my company and even 3 week vacations. When I used to work as a stockbroker on the street (1 yr) my vacations were unpaid so I didn't take any. I also brought lunch in from home, ate at my desk and smoked at my desk too(g-d I miss those days). Regarding eating at my desk, I had 15 min to eat my lunch so my eating habits are atrocious as a result.

[Andy]

I also brought lunch in from home, ate at my desk and smoked at my desk too(g-d I miss those days). Regarding eating at my desk, I had 15 min to eat my lunch so my eating habits are atrocious as a result.Are you sure your previous employer is not a rehab center? It sounds harsh. :smt009
Max, Mike, thanks for the info. The more informed we are, the better choice we make. I do not want to go into a job and then run crying back out and whining that I did not know. With all the knowledgable people around on Quantnet, one should be well informed.
One of the main incentives people have heading into this field is the huge amount of money they get paid. With reality checks abound, they will have a more practical approach. If I love my job and it pays well, it's perfect. And I love what I learn so far. :smt023

[maciek]

I heard an opinion that in general european banks require shorter working hours than the american ones. This might be true because there are a lot of European managers at those firms who set the pace of work for all others. I can confirm that from my experience. I used to work for a German investment bank Dresdner Kleinwort. I was working on trading floor in Frankfurt as a fixed income product controller, I usualy started around 9.15, went home around 5.30-6.00. Basicly it was a 8 hour shift+ lunch (European standard). When I moved to NY and worked for the same bank. I usualy showed up around 8.45, went home around 6.00, sometimes I had to stay longer, sometimes left earlier. No work on weekends, everybody makes full use of their 20 to 30 days of vacation- this applies to all employees including traders with whom I worked.

The bank pays less, bonuses are smaller, but it is a very good place to work for people who work for living, not live to work (I consider myself one of them).
So I would say Yes, there is an option for those of us who want to work on the street, have an interesting job and still have time for the family.

[Andy]

In the face of the Amaranth fiasco, does anyone still want to travel to Greenwich for work after graduation ? :mrgreen:

Here is a Bloomberg exclusive. Citadel and other big IB step in to stem the bleeding.
Amaranth Hedge-Fund Losses Hit 3M Pension, Goldman (Update2)

By Jenny Strasburg

Sept. 20 (Bloomberg) -- 3M Co., Goldman Sachs Group Inc. and San Diego County's retirement fund say the meltdown of Amaranth Advisors LLC, the hedge-fund manager that lost about $4.6 billion in the past month, may cost them millions.

The $9.2 billion pension fund of 3M, maker of Post-it Notes and electronics and cleaning products, gave less than $92 million to Amaranth, according to Jacqueline Berry, a spokeswoman for the St. Paul, Minnesota-based company. Goldman Sachs Hedge Fund Partners LLC has about $13 million with the firm, according to a regulatory filing today.

``This will spark activity by Congress, or by regulators, for some oversight of an area that has not been watched,'' said Dan McAllister, a board member of the $7.2 billion San Diego County Employees Retirement Association. The fund invested $175 million with Amaranth in 2005.

Amaranth, named for an imaginary flower that never fades, had gained more than 25 percent earlier this year on bets natural-gas prices would rise. Prices tumbled this month, triggering losses that grew as it scrambled to unwind trades. The Greenwich, Connecticut-based firm's blowup is the biggest since Long-Term Capital Management LP almost collapsed in 1998.

In a bid to stem losses, Amaranth plans to give up its energy trades to Citadel Investment Group LLC, a $12 billion hedge fund in Chicago, and New York-based bank JPMorgan Chase & Co., two people with knowledge of the decision said today. Citigroup Inc., the largest U.S. bank by assets, may buy a stake in Amaranth.

Wall Street Clients

Amaranth has managed money for Wall Street banks Morgan Stanley, Credit Suisse Group, Deutsche Bank AG and Bank of New York Co., according to U.S. Securities and Exchange Commission filings. A $2.3 billion Morgan Stanley pool that invests in other hedge funds had about $126 million in Amaranth as of June 30, according to regulatory filings. Bank of New York allocated $10 million of a $165 million fund to the firm.

Caisse de Depot et Placement du Quebec, Canada's biggest pension-fund manager, had C$77.3 million ($68.5 million) with Amaranth at the end of 2005. New York-based Arden Asset Management, which farms out $13 billion to hedge funds, gave about $39 million to Amaranth, according to spokesman Jonathan Gasthalter.

Max Re Capital Ltd., a Bermuda-based reinsurer, may also be a casualty. The company said today third-quarter earnings will be reduced by $35 million because of losses from hedge-fund investments. Max Re didn't disclose which hedge fund caused the losses, and spokeswoman Sheila Gringley didn't respond to a phone message seeking comment.

Natural-Gas Selloff

Connecticut Attorney General Richard Blumenthal said he's examining Amaranth's losses.

``We are taking some initial steps to investigate what went so terribly wrong, whether there was a truthful and accurate disclosure to investors,'' he said today in an interview.

Tom Carson, a spokesman for U.S. Attorney Kevin O'Connor in Connecticut, declined to comment, as did Bryan Sierra, a spokesman for the Justice Department in Washington and SEC spokesman John Nester.

Natural-gas futures have plunged 17 percent this month. The losses may have been exacerbated by Amaranth's attempt to exit bets on rising prices, said Robert Van Batenburg, head of research at Louis Capital Markets LP in New York.

``The whole debacle has left Amaranth trying to unwind its positions,'' he said.

MotherRock LP, a $400 million fund run by former Nymex President Robert ``Bo'' Collins, shut last month after unsuccessful bets on the direction of natural gas.

Amaranth Equity Stakes

Both funds attempted to profit from spreads, or discrepancies in price, between different gas-futures contracts. Amaranth used loans to expand its bets, increasing its losses.

Shares of companies in which Amaranth invested have also been hurt.

The stock of Cinram International Income Fund, a Toronto- based maker of digital-video discs, fell 5.4 percent earlier this week on concern that Amaranth would sell its 15 percent stake. The shares rose 50 cents to C$22.10 at 4:30 p.m. in Toronto after the Globe and Mail reported Amaranth had received bids for its holdings.

Counsel Corp.'s stock has dropped 14 percent this week. The investment firm, also based in Toronto, said in a Sept. 18 filing with Canadian regulators that Amaranth proposed selling its 34 percent stake.

Consultant's Advice

The San Diego County pension board invested in Amaranth on the recommendation of consultants Rocaton Investment Advisors in Norwalk, Connecticut, board member McAllister said. The San Diego County fund is unconnected to the San Diego City Employees' Retirement System, which has a deficit of more than $1 billion.

``We are aware of the Amaranth situation, and we are in dialogue with our clients,'' Rocaton spokesman Todd Miller said, declining further comment.

It will take weeks to find out how much pension money melted away with Amaranth's bad trades, Damon Silvers, associate general counsel of the Washington-based AFL-CIO, said in an interview today.

The largest U.S. labor association, whose member unions hold more than $400 billion in pension assets, has criticized provisions of the pension-reform law signed by President Bush last month that loosened restrictions on pension-money flows into hedge funds.

``This shows what an appalling decision that was,'' Silvers said.

Caveat Investor

Hedge-fund investors should take Amaranth as a warning to do better homework before trusting money with a fund, said Robert Schulman, chief executive officer of Tremont Capital Management Inc., a Rye, New York-based investment firm.

``Investors need to understand the risks,'' Schulman said.

McAllister, who is also San Diego County's treasurer and tax collector, said the pension fund was led to believe by Rocaton that the Amaranth investment would reduce its risk.

``If it looks too good to be true, maybe it is,'' he said.

To contact the reporter on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net

[RussianMike]

I wouldnt trave to Greenwich, I would try and live there if I worked in Greenwich, though it is quite pricey. There may be some surrounding areas that might be cheaper

[Muting]

He used to get to work between 6-6:30 am and leave at 6 or later when he started.

In this case, for one thing, I don't have chance to take the summer statistics class. For the other thing, I probably need to sleep early now and begin to adjust my biological clock as soon as possible. A friend told me that in commodities desk, traders are expected to work at least 12 hours per day. I guess it is the same for all other desks, right?

[juicyj]

frankm, I remember interning for B of A at the mortgage desk. Vacations actually seemed to be the norm. But the lunch hour thing was a no no.

After one of my particularly lengthy lunches, the traders rode my case about it and that was that.

On the bright side, I became pretty well-versed on New York food delivery services.

Most of my co-workers made it to work about 7:30-8 and left by 5 (the younger ones trying to make a push for promotion, impressions stayed until 6). My MD constantly showed up past 8am...but he was a star.

[Andy]

I guess it is the same for all other desks, right?
No. It depends on the desk. Flow desks have a more structured schedule than prop desk. Desks that trade OTC don't necessarily follow market trading hours. If you work in a support role, then your schedule have to match the traders you support.
But wherever you work, count on some crunch time where something important needed to be done such as before a big trade.

[charlesdwright]

there is no state income tax in connecticut, I believe (it was true in the past). The real estate is lush and within a short hop, probably affordable (Stamford had among the highest foreclosure rates recently reported); apart from the fact that the local government can get pretty weird, can't imagine why someone working there wouldn't also want to live there.

[MidasCFA]

both of my uncles live in Stamford :)

thats why i've been there quite a few times and also i interviewed with UBS there. this is one rich small lush town!

[doug reich]

there is no state income tax in connecticut


I don't think that's true. I definitely owed them taxes this year... plus, the Google gives me the following hit for "connecticut income tax":

DRS: Income Tax (http://www.ct.gov/drs/cwp/view.asp?a=1433&Q=395840&PM=1)