To Kevin Cronin, 35, head of domestic equity trading at AIM Management in Houston, Texas, a big fish like AIM should have the ability to maneuver in the same way as a small mutual fund company.
"Our investment style is very pro-active," Cronin said. "You are always trying to find liquidity before the other people who are doing the same thing as you are."
Founded in 1976, AIM has grown into one of the nation's largest and most well-known mutual fund companies. It has some $176 billion in assets under management, runs some 50 mutual funds, and has about 2,500 employees.
Born in Tucson, Ariz. and raised in Lexington, Ky., Cronin graduated with a B.A. in economics and psychology from Indiana University in 1987. "I graduated the same year the Hoosiers won their last national championship," he quipped.
Following his graduation in 1989 with an MBA in finance from Vanderbilt University in Nashville, Tenn., Cronin joined the trust department at Barnett Banks Trust Company in Jacksonville, Fla. "I was sort of a jack-of-all trades," he said. "I was an equity analyst, a portfolio manager, and I did some part-time trading."
Two years later, Trusco Capital in Atlanta, Ga., hired Cronin as its senior equity trader. His next stint was as head of equity trading at First Union Capital Management in Charlotte, N.C., where he spent four years. In 1997, he joined AIM as head of its domestic equity trading desk.
Cronin and his wife Kim and their two young children – Nicholas, 6, and Caroline, 4 – live outside of Houston in the small town of Sugarland. As a graduate of Indiana University, Cronin roots every year for the Hoosiers to win another national championship.
Cronin's trading desk comprises 10 trading pros and four assistants. About 60 percent of its trades are listed, 40 percent are Nasdaq. The desk interacts with about 80 portfolio managers.
"We pursue liquidity very aggressively," Cronin emphasized. "The game is to try to get as much liquidity without having a dramatic impact on a price of stock before a big wave of buying or selling hits."
"When you are a big firm like we are," he added, "there are certainly a lot of people who would like to profit or benefit from knowing exactly what we are trying to do." Cronin did not disclose the number of trades or dollar amounts that AIM performs each day.
AIM has relationships with over 200 broker dealers and uses about 25 of them on a regular basis. Cronin said about 75 percent of its trading business is sent to its top broker dealers. However, he pointed out that his desk will use any broker dealer that is able to offer liquidity. "We use the liquidity that the Street provides," he said.
Cronin foresees a more complicated marketplace resulting from decimalization. "We are happy the spreads are narrowing," he explained, "but we are really concerned about the ability for people to break up a trade or to negate a trade by jumping in front for a penny. There can be some significant disruptions as a result of decimalization."
Unlike many other buy-side firms, soft dollar arrangements are not a huge part of AIM's trading business. "We have an enormous amount of discretionary dollars," Cronin said. "You have to have the creativity, the latitude, and the ability to find liquidity. To have to send all your trades to a particular broker or not be able to use a broker who has real liquidity, is a considerable hindrance to finding the kind of liquidity that we need."
An increasing number of mutual fund companies are using volume weighted average pricing (VWAP) strategies. Cronin emphasized that AIM "very actively trades and we do not use VWAP strategies." He added, "Just because we have a lot of assets under management and our position sizes are enormous, that doesn't mean we can't be value-added components of the investment process."
Cronin, who is a chartered financial analyst, said the value that a buy-side trader brings to the table is often misunderstood. "In the past buy-side trading was treated as sort of a clerical or back-office duty," he said. "Over the past five or ten years mutual fund companies have come to realize that they need highly intelligent, capable and creative people who could get stocks bought and sold without having a tremendous impact. Buy-side trading is an important part of the investment process."
