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Deutsche Bank’s Quantitative Team to Leave, Start Hedge Fund

Date: Wednesday, February 25, 2009
Author: Saijel Kishan, Bloomberg

Deutsche Bank AG’s quantitative trading group is leaving to start a hedge fund as the Frankfurt- based bank scales back riskier businesses.

Equitech Group, the bank’s proprietary equity unit, is forming Roc Capital Management LP, which will be based in New York and run by Arvind Raghunathan, the bank’s head of global arbitrage, according to the fund’s marketing documents. Roc Capital will open in the second quarter with more than 20 people including traders and scientists globally.

“In this environment, it’s particularly important for individuals to have reputations in order to get access to seed money,” said Nicola Ralston, co-founder of London-based PiRho Investment Consulting Ltd., which advises clients on investing in hedge funds.

Josef Ackermann, chief executive officer of the Frankfurt- based bank, said on Feb. 5 he will cut risk by shifting resources from areas such as proprietary trading after “unprecedented market conditions revealed some weaknesses” in trading operations. He said the firm had reduced risk in proprietary trading by about 75 percent. Boaz Weinstein, 35, left the firm this year with about 15 colleagues to start a hedge fund after the proprietary credit desk he ran lost $1.3 billion in 2008.

Michele Allison, a New York-based spokeswoman for Deutsche Bank, declined to comment.

Recent Returns

Equitech, which was part of Credit Suisse Group AG’s proprietary trading unit until 1999, returned 2.37 percent last month after posting a 1 percent loss last year. Quantitative directional funds lost 2.6 percent in January after posting a 23 percent decline in 2008, according to Hedge Fund Research Inc. in Chicago. Quantitative funds use mathematical models to pick securities to buy and sell.

Roc Capital will be supported by a team of 40 people in India who are trained by Equitech.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

Raghunathan, 45, first joined Deutsche Bank in 1995, after working at Credit Suisse First Boston since 1992, according to the documents. He returned to Credit Suisse from 1997 to 1999, running a proprietary trading group, before going back to Deutsche Bank. He graduated from Indian Institute of Technology and got a doctorate from the University of California, Berkeley.

Joining Raghunathan will be Robert Wolfson, who is chief operating officer of equity proprietary trading at Deutsche Bank, where he has worked since 1989. Wolfson will also be operating chief for Roc Capital.

Anupam Ghose, 41, who works at Credit Suisse Group AG’s prime services group, will be Roc Capital’s chief strategy officer. He had previously worked on the global portfolio trading and equities swaps desk at Goldman Sachs Group Inc.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net