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January 1, 2013

Prepare Deeply, Act Quickly

By Mary Schroeder

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Karen Heidelberger figured trading might be a career compatible with her personality after running a group inside Merrill Lynch's mergers and acquisitions department from 1996 to 1998 that tried to resolve conflicts ahead of time.

Karen Heidelberger

The group was responsible for ensuring that Merrill Lynch didn't have a business or legal conflict of interest before accepting an investment banking assignment. In the role, she had to work with the heads of deal-making and investment banking and to make big decisions very quickly.

She went back to school, from 1998 to 2000, to get a business degree at Harvard University. During that time "I was thinking about what I loved about that job and realized that trading fit those criteria," she said. "You're making decisions quickly using the information that's available and making the best decision that you can. That's trading."

While in business school, Heidelberger took an internship in equity trading at Merrill Lynch and met Jeff Kaplan, who is now head of trading at Deerfield Management in New York, an investment firm focused on health care. Kaplan moved to Deerfield, and recruited Heidelberger to the firm, where she has worked for more than 10 years. She is now a trader in equities and fixed-income products, as well as a partner.

Heidelberger's insight at business school proved correct: she loves her job, and especially likes the collaborative atmosphere at Deerfield, where the trading desk has input into the process of making decisions by providing color about how things are trading.

For instance, Heidelberger might hear about a particular company in the morning meeting that doesn't trade that well "and all of a sudden we see a seller out there," she said. In that case, she would raise the issue with the portfolio manager and analyst.

Stock action can play a role in the timing of the firm's buying and selling decisions, she said.

Deerfield, predominantly an equity trading shop, is focused on healthcare, and that is another aspect that Heidelberger likes. "It's always changing: there's some kind of new drug, governmental policy or new generic, and you can learn something new every day," she said. "Let alone learn about how all the stocks trade," she said, adding, "it's very mentally engaging."

Heidelberger said the biggest challenge is to find liquidity "where we can, because a lot of the names we traffic in are very illiquid," and not move the stock in the process. "Our trading philosophy is to find the natural other side trading a block, rather than buying it from a broker. So we spend a lot of time and are patient and diligent with our orders." But a big challenge is that "nobody really wants to trade in block anymore."