Momtchil Pojarliev
Traders Magazine Online News

Some Like It Hedged

BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

July 27, 2005

The Growth Challenge at GM Asset Management

By Michael Scotti

Also in this article

A long-time specialty painter at the General Motors plant in Linden, N.J., learned a while back that machines can't do everything. They make mistakes, too. This 30-plus-year veteran, now in retraining classes at the factory idled since May, is terse in describing his job: "I had to fix what the robots messed up." He also handled the more intricate painting that the machines couldn't do. Once the union contact runs out in September, 2007, this member of the United Auto Workers will be retired and find that his past and future are oddly tied to the trading desk at General Motors Asset Management (GMAM), less than 20 miles away in New York City.

The money that will pay for his retirement will pass through the GMAM trading desk. But professionally, this painter may never realize how similar his old job is to what the GM trading desk does daily: Work the outliers, the tough stocks that cannot be traded by machine.

"Sometimes you have to be ready to interject human judgment into a trade," said George Bodine, director of trading at GMAM. Bodine, who considers himself a traditional trader at heart, executes about 70 percent of the volume that flows through his desk via programs, or packaged trades. The balance-the trickier and less liquid stocks-is worked the old-fashioned, manual way. It's worked through crossing networks and traditional brokerage.

"Sometimes you have to be ready to interject human judgement into a trade."

This has served the pension fund well, since the equities managed internally are quantitatively driven. It would be impossible for the four-person staff to deal with hundreds of trades at a time. Add the fact that commissions are in the 1-cent range, and program trading is even more attractive.

Big Player

GMAM employs roughly 75 outside managers in all asset classes. It manages about $150 billion overall, with about $70 billion-47 percent-in equities. Exactly 15 percent of its assets are internally managed. About $8.5 billion in equities are managed at 767 Fifth Avenue, its headquarters.

The $150-billion pension fund, which manages $90 billion of its own money, will certainly be called to the test to deliver the benefits that it promised to employees. According to a GM spokesman, recently announced plant closings and layoffs-expected to affect 25,000 workers-will not put additional strain on the pension fund. The layoffs will equal normal attrition rates, he said. (See "GM Pension Fund Challenge.")

Bodine acknowledges the challenges ahead for the pension fund and the responsibility that his trading desk faces in its effort to add basis points to performance. Still, after 30 years in trading, the Auburn, N.Y., native has seen the evolution of institutional trading, with its basics essentially left intact. Trading is about making market calls and decisions, regardless of the increasing use of electronics. The life cycle of a trade may shrink, as the number of steps in the trading process is reduced because of technology. But ultimately, there still needs to be decision-making along the way. "I don't think a machine can interpret how the market will react when Alan Greenspan speaks," Bodine said.

High of the Day