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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.

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October 14, 2009

Bernstein's New Frontiers

By James Ramage

Bernstein later added product specialists--sometimes called sector specialists or specialist salespeople. Each is expected to know names and sectors, and to amass information from Bernstein research and from around the Street to benefit trading clients.

"Given our strength in research," Wright said, "those are people who pull research intelligence to the point of execution and use that information to try to impact our trading desk clients."

About a year ago, Bernstein began committing small amounts of capital to facilitate clients' orders. The firm does not trade proprietarily, and so doesn't take positions for internal gain. It still employs an all-natural model, Wright said.

"For our key client partners, it's something we wanted to be able to offer to them to make it easier for them to choose us for an order, to trust us with an order," Wright said. "We're in a position now where we can facilitate someone; they don't have to take the risk of calling us and then we can't protect them if something prints."

The program has gone well, he added. Facilitating for a handful of clients has helped marginally with Bernstein's market share. And the firm expects the activity will increase over the next year or two.

On the product side, Bernstein in August expanded its derivatives effort in single-stock options, exchange-traded funds and cash-based index trading. The business started roughly 18 months ago with a two-person desk. In August, it hired five senior-level pros, Wright said.

"It was a very sensible way to grow the firm, and to be more relevant to our clients," he added. "We'll use derivatives expertise to make us better at our other core competencies; sales traders and sector traders get smarter about what's happening in names. A lot of times, the activity in the underlying options can tell you a lot."

The derivatives team will commit capital, as well. And, as with equities, the team will have a specialist responsible for disseminating research and "pulling the Bernstein research brand into the derivatives space," Wright said.

This is nothing new. In the past year, or so, many firms around the Street have been opening derivatives desks to supplement their cash businesses. Bernstein said it will carve out its niche in the space by leveraging its sizable research product with its new derivatives desk.

"We've already seen significant growth," he said. "It will be many times larger than it previously was for us."

For its next trick, the firm is moving into Asia. It can execute global programs there already through a third party, Wright said. But Bernstein is still determining where it will locate. And it plans to fill out its strategy with both sales and trading soon.

"We're mapping that out now," Wright said. "But we expect to have research coverage, as well as sales and trading capability, in the major markets over the next six to 12 months."

The process begins with research, Wright said. Sometime in 2010, sales and trading will follow in tandem. Salespeople will support the research product. Traders will focus initially on the global program trading business, and ultimately provide cash trading.