Ellen Hanlin began as a trader in the bear market of 1974 with a bank trust department. She then traded for the DuPont Pension Fund, and later for ASB Capital Management, before finally coming to Howard Hughes Medical Institute in Chevy Chase, Maryland. She is the firm's chief equity trader.
Portfolio management is a major activity. That's because the Institute awards tens of millions of dollars annually in grants to educational groups.
Hanlin describes the portfolios she trades for as medium-sized. But sometimes, she notes, several strategies will be used to complete trades. Her philosophy is simple. "To find liquidity, I first look for a natural fit," she said. "If it's there, I do the trade."
Hanlin will consult several of the dozen dealers in the network she has built. She sends a lot of business to about four of them. The chief quality she looks for is trust. For that reason, she rarely uses specialists. That's because she "does not know" any of them, she adds.
However, Hanlin is pragmatic. "I would go anywhere if the price is there, and if I can trust the source to get it for me consistently," she said. She will sometimes use ECNs, but has not yet used single stock futures. However, she would if she saw sufficient liquidity and could get her "price."
Before completing a trade, Hanlin will throw up a chart on Bloomberg to get an overall picture. She believes in technical analysis, but not exclusively.
"Fundamental and technical analysis are complementary," she said. Hanlin said she is enjoying an improvement in Nasdaq liquidity because of recent rules changes. "It has helped, especially when I have to trade in stocks that are not as liquid as I would like them to be," she said.
Rarely dogmatic, Hanlin says that she does not use VWAP. "It's popular because some people can make money at it," she explained, "but I think it's a fad that will pass in time."
Hanlin's performance is measured each trading day. "My performance is a function
of how well I did versus the day's price movements in a particular security," she said. "My portfolio manager and I have always worked very closely together, so that relationship may be a little different here than at other places."
Lately, Hanlin has begun to trade corporate bonds. "They remind me of the OTC markets 20-odd years ago," she said. "You sometimes have to go around rounding up 10-lots here and 10-lots there to make up an order."
On commissions, Hanlin argues that even brokers have to make money so they can offer their services. She does not seek out soft-dollar arrangements but does maintain some. That's because the services she needs are effectively cheaper via soft dollars than paying directly in cash, she notes.
What are the differences between trading today and at the height of the bull market? "The human factor," Hanlin said. (Hanlin was profiled in Traders Magazine several years ago at the height of the bull market.) "Many people were flying high, but a lot of air has been let out of the tires in the last three years," she added. "I can't say it's nice to see, but I think now we are on a little better footing."
Hanlin was asked if this means market people are now concentrating on getting the business done as opposed to talking about how smart they are. "Absolutely," she responded. "Remember, I started out in a bear market, so when somebody is peeved and asks why I missed a bid, I can take it in stride."
"It's so interesting how people, who have never seen one before, act in a
bear market," Hanlin said. "I am pretty much at home in bear markets," she added. "You have to be quick, and you have to concentrate on getting the business done." This, of course, is what good trading has always been about.
