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January 31, 2008

Old Dogs, New Tricks: Keith Gertsen

Does AllianceBernstein's Quant Lab Offer Secrets for Trading?

By Michael Scotti

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Help Wanted: Global money manager looking for a head trader with sellside experience, knowledge of hedge funds and various asset classes, as well as a strong understanding of technology and quantitative tools needed in an effort to streamline trading processes and lower trading costs at a global organization.

Over the last two years, that could have been an ad for the last handful of top trading jobs at big buyside shops, all of which went to former sellside trading veterans. Ironically, just a half-dozen years ago, these Wall Street pros probably would not have given these jobs a second look.

But that's not the case today. Part of the attraction, says one observer, is that sellside pros are viewing these buyside positions as challenges-they require restructuring entire trading operations, from the processes to the technology. The fact that these jobs are at big institutions that pay well doesn't hurt either, as the spread in pay between the sellside and top buyside jobs has narrowed, he adds.

Brian Conroy, a sellside and hedge fund veteran, began the trend just over two years ago when he joined Fidelity Investments. More recently, Rob Arancio joined Neuberger Berman from Lehman Brothers, where he co-headed liquid markets.

Michael Gitlin, who has global and fixed-income experience, and most recently headed equity sales at Citi, joined T. Rowe Price not long ago in a newly created job to oversee global trading.

Trade-cost analysis pioneer Wayne Wagner says these hires of top managers indicate that the buyside realizes that it needs to do a better job to rein in trading costs with streamlined processes and better technology and analytics. "The institutions have been the laggards in this area," Wagner says. "The hedge funds have been the leaders."

This feature outlines the experiences of two former sellsiders who have taken top buyside jobs: Ray Tierney of Morgan Stanley Investment Management and Keith Gertsen of AllianceBernstein. Both men filled newly created positions and are restructuring their desks around the world.

There's good reason why Keith Gertsen, global head of trading at AllianceBernstein, sounds like a risk trader when he talks about the business. He used to be one. Gertsen was global co-head of risk block deals in capital markets at Deutsche Bank in New York for two years, ending in 2004. He was among the first group of traders on Wall Street using their firms' balance sheets to take on portfolios valued in the hundreds of millions of dollars. The job entailed redistributing some of that risk after the close.

There's also good reason why Gertsen, a 14-year brokerage veteran, sounds at times like a portfolio manager. He did that, too. Gertsen ran a portfolio at a large hedge fund before joining AllianceBernstein nearly two years ago. While at the hedge fund, he did double duty and traded his portfolio.

Being both a portfolio manager and a trader, he says, might have been the best training for his current role in overseeing trading at AllianceBernstein, which manages $580 billion in equities. "My hedge fund exposure gave me a different perspective on the need to capture performance in trading," Gertsen says.

Still, while it may have been Gertsen's varied background-capital markets, derivatives, portfolio management and trading-that won him the top trading job