Buyside Snapshot

Communication between trader and portfolio manager is key to maximizing alpha for small caps. That's why at ING Investment Management the firm's entire small-cap team works to be on the same page and not miss opportunities.

Some people start small. Not Rob Pulkys, head trader at Highstreet Asset Management. He started his trading career in 2007 at one of Canada's largest investors, Ontario Teachers Pension Plan. He started there right out of college as a trader and worked for 20 portfolio managers, who invested across every asset class. Baptism by fire, indeed.

With every crisis comes opportunity. In the case of Drew Harbeck, a trader at the small-cap shop Cortina Asset Management, his opportunity came when he joined the Milwaukee-based firm's desk right before the market meltdown began, roughly three years ago.

Jennifer Setzenfand, a senior equity trader at Federated Investments, is a second-generation trader. Her father, Dennis Green, spent 38 years in the Nasdaq/OTC world, running desks in Cleveland, Chicago and Baltimore. The father-daughter act also shares one other career similarity: Setzenfand is slated to be the next chairman of the Security Traders Association. Her father held that distinction in 1990.

When an order hits the blotter, traders need to come up with a strategy. Ultimately, the decision will be to either trade high touch through a sellside desk, or to go the low-touch route and do it themselves. For David DeVito, CMT, the head trader at Madison Investment Advisors, he chooses to trade low touch for about 75 percent of his order flow.

At Brandes Investment Partners, Joe Scafidi has received quite an education in block trading. He puts a high value on sellside services and the give and take in the relationship: "Our goal is to extract as much value from the sellside as possible, while maintaining a great relationship."

The decision to cut back on broker capital was an easy one for Joe Scafidi, when he had to make it not long after joining Brandes Investment Partners as head trader in 2007. "I thought we were using way too much," said Scafidi, who spent nearly 20 years at bulge bracket shops in New York.

Fundamental stock picker Sean Murphy has a philosophy that has served him well over the last decade. "If you've got a great idea, make it a real position," Murphy explains. During the last three years, he's done that at Boston-based Game Creek Capital, an absolute-return hedge fund.

How can a pension fund maximize its commission flow and best serve its shareholders? That's the question John Lane, the newly appointed chief investment officer of the Ohio Public Employees Retirement Systems faced back in January 2010. The 25-year veteran's answer was a familiar one, said Joan Stack, trading manager at OPERS: to have the fund's desk trade their stock picks.

Block trading remains a challenge today. So when Craig Jensen, principal and head trader at Armstrong Shaw Associates, in New Canaan, Conn., sees a large contra, he pounces. That's the case even if the block costs him a little more than what he originally wanted to pay. For him, liquidity trumps price.

If you want to trade with First Investors Management Co., a New York-based mutual fund group with $3 billion in equities, your brokerage firm needs to be as skilled in high-touch trading as it is with low touch.

Dennis Fox, head trader at Munder Capital Management of Birmingham, Mich., is in the midst of integrating his firm's trading system with its recent acquisition: Integrity Asset Management of Rocky River, Ohio.

Over the last year, the buyside has been asking for greater transparency of its orders. But for Franklin Templeton, that request has already been fulfilled.

Jump in with both feet first. That's the mantra of Dan Royal, co-head of global trading at Denver-based Janus Capital Group.

If trade-cost analysis could do more than compliance or give a general tracking of overall desk performance, the buyside would embrace it more.