The London-based trading team at Ninety One has a very particular set of skills. The active investment manager specialises in emerging and frontier markets trading across fixed income, credit and specialist equities. And sitting on its global trading desks are a pod of traders known for their ability to interact with some of the most inaccessible financial markets around the world.
At the helm of the team is global head of trading Cathy Gibson who oversees trading across the asset manager’s offices in London, the US, Asia Pacific and South Africa. Gibson is a seasoned trader with an extensive career in markets. She joined Ninety One in 2021 from Royal London Asset Management where she had been head of dealing for three years.
Previously in her career, she spent two and a half years as head of fixed income trading for UK asset management at Deutsche Asset Management [now DWS] and nearly five years at Pioneer Investments as a senior fixed income dealer. She began her career with a two-year stint as a principal dealer at Bank of Ireland Global Markets.
In her more recent roles however, Gibson has stepped away from the markets and instead refocused her attentions on leading and developing her global team. Having a cohesive team globally has proved an increasingly essential tool for institutions in light of the ongoing globalisation of finance and the turbulence caused by market events in the last few years.
Varied approaches to the Covid-19 pandemic starting in 2020 paired with the subsequently varied approaches central banks have taken to abate the economic fallout has left traders, in particular those in the emerging and frontier fixed income space, more reliant on their relationships than ever, both internally and externally.
“Markets have been tricky. Show me a time when they haven’t,” asserts Gibson. “Markets are constantly challenging and that’s the key aspect to our role.”
For Gibson, the key to an effective team is autonomy and each individual trader feeling a sense of ownership to their day-to-day activities.
“When people have ownership in their function and they can see their contribution to the business, that really motivates them to make sure that they are constantly improving,” she explains. “In general, my experience is that people don’t like change being done on to them, but they have no problem being part of it and driving it.”
Ninety One’s trading team consists of 17 globally with six – soon to be seven – based in London. The firm also has trading hubs in New York, Hong Kong and Cape Town. Given the wide breadth of products that they cover, the team leverage each other day-to-day to understand how the markets are ticking over.
“When we see an inflow and notice that some of that cash has been deployed in Asian markets earlier in the day, it gives us insight into market liquidity,” says trader Ed Wood. “There’s often a connection between the markets they trade and those we handle here in London. This can provide valuable perspective, such as when duration is heavily bid, it might mean certain bonds are difficult to source for us.”
Wood joined Ninety One in 2021 after serving for a year and a half at Aviva Investors as a credit trader and for five years at Vanguard as a fixed income trader. Wood now trades the credit side of things at Ninety One across regions and also supports the local rates and FX traders on the desk.
For him, it is the correlation between real world events and the markets that drew him to his role in finance in the first place. The changing stance of the US Federal Reserve when it comes to interest rates and the looming election, paired with the Bank of Japan’s decision to raise rates, is just one topic that has kept traders busy as of late.
“It’s impossible to be involved in the markets without paying attention to developments in the US. However, Japan’s current situation is particularly significant, as they’re [The Bank of Japan] one of the few central banks raising rates while others are cutting,” says Wood.
“This has broad implications, as demonstrated recently when the Nikkei dropped over 12% in a single trading session, affecting volatility and liquidity for weeks. This context is crucial for our day-to-day operations. If a portfolio manager wants to execute a trade days after such an event, they need to understand that liquidity may be reduced, and they must be confident in their strategy if they’re willing to pay more in the bid-offer spread.”
One of the newer members to the Ninety One team is Liam Hagan – formerly recognised as one of The TRADE’s Rising Stars of Trading and Execution in 2023. In the same year, Hagan joined Ninety One from Amundi where he had been serving as an FX trader for almost four years. He now trades foreign exchange for the G10 and emerging markets, while acting as a backup for the emerging markets fixed income traders when necessary.
“You’re looking at news headlines and the news flow really matters and can have massive ramifications on the day to day workflow in FX,” he explains. “Oftentimes your family sees the six o’clock headlines, and they ask have you heard about this? and you say yeah I’ve been living that over the course of the last eight to 10 hours.”
Previously in his career, Hagan also spent four years on the sell-side at Société Générale in various FX sales roles. He moved to the buy-side in 2019 for a change of pace, looking to be more holistic in his approach to execution.
“The sell-side tends to operate on a 24-hour basis,” he adds. “And what happens in one 24-hour period doesn’t necessarily have a bearing on the 24-hour periods either prior or post, which can be a little bit frustrating at times because you are somewhat chasing the narrative, whereas on the buy-side, your approach becomes much more long dated and holistic.”
The frontier
Ninety One specialises in trading the emerging and frontier markets, an area of expertise that brings with it a layer cake of nuance that the team must incorporate into their day-to-day workflows. Frontier markets are more established than LDCs [least developed markets] but are less established than the emerging markets. They’re newer in terms of access to capital but less developed in terms of how feasible it is to get into them.
It means workflows aren’t always as straightforward, explains emerging markets trader Richard Willis. Willis is one of the longer serving members of the trading team in London. In nothing short of a baptism of fire, he took his first steps into trading in January 2007 in the build-up to the global financial crisis.
“Historically, investment banking and trading was fairly wild and there was a lack of control generally in terms of the way banks managed traders, P&L and risk,” he adds. “Post the GFC [global financial crisis] things have changed 180 degrees in terms of regulation and compliance regimes.”
Starting his career at Absa Capital on the Africa trading desk, Willis explains that as a junior market maker he was given a book of business – Nigerian and Ugandan bonds among other things – and told to face off against seasoned asset managers and peers.
“Working at a bank, on a market making trading desk is arguably one of the most fun, but also one of the most stressful roles you can play,” he says. “You’ve got competing market makers that you are up against. You’re also going against very sophisticated investors who are no longer naïve. For example, if they look at a country like Poland, the buy-side research analysts and portfolio managers are analysing the nuances of each of these bond curves, so they’re probably know things a lot of time better than the sell-side trader.”
He moved to the buy-side and his current role at Ninety One in 2016 after five years at Barclays in an emerging markets trading role. He explains that he left the sell-side for a change of pace but that his experience there has proved useful in his current seat.
“What they [Ninety One] liked is that someone from the so-called ‘dark side’ was coming to join them to hopefully protect them from the advantages that the banks do try to take on the naïve in these frontier markets,” he says.
He now trades emerging markets bonds, credit default swaps (CDS), interest rate swaps (IRS) and foreign exchange.
When asked what key trends the emerging and frontier markets have seen as of late, Willis explains that there have been several substantial but necessary devaluations in national currencies to encourage foreign interest in markets such as Nigeria and Egypt.
“You’ve seen it a few times in the history of their respective financial markets, the need for fairly substantial devaluations,” he explains. “We’re talking circa 50% in both their currencies this year. The cheapening in the local currency and the local assets, attracts offshore investment which is crucial for the long-term development of these countries.”
Subtleties and nuances
The nature of the frontier and emerging markets lend themselves to more off-the-beaten-track workflows. Given the liquidity landscape can often be more sparse or difficult to navigate, the use of local brokers alongside the bulge brackets is something Willis thinks is essential to minimise market footprint. Due to lower demand, bulge brackets will sometimes not cater for the particulars of what frontier traders are looking to execute.
“Say a large real money account wants to buy South African Government Bonds at the same time as us because of the positive sentiments there post the elections, I know the logical approach is to go to a bulge bracket US investment bank because it’s easiest means. But sometimes you want to go to the road less trodden, and that’s when you make use of local brokers,” he says. “My preference typically is to go under the radar of the bulge bracket banks and to make use of smaller regional banks that access to domestic clients.”
Market nuances also mean the trading team at Ninety One are more voice driven and focused on relationships-based trading when it comes to trading FX and frontier pairs. This makes us somewhat of an outlier in comparison with the street, Hagan says.
“It’s very much about us having a picture as to whom has the ability to access the liquidity both onshore and offshore, who’s got a reliable enough franchise that they can potentially show us a risk price and then who internalise and offset the risk in a manner that’s not detrimental to either us or the wider market,” he says.
Data is therefore even more essential. On the FX side, Hagan confirms that using multiple single dealer platforms from a data perspective is usually a good strategy as teams can gain access to a better picture of market whether that be volumes in sector flows, revaluations country-by-country or real-time flight data around liquidity available either above the offer or below the bid.
“What we focus on be at the EM currencies and the frontier currencies, particularly like Nigeria, Egypt, Ghana, Kenya, these are markets that are very fragile, illiquid, and sometimes unobservable, even in Bloomberg,” he explains. “It can be very difficult to work out the quality of data sources. Who is saying they’re good five by five but is actually only good in one by one, and who has the ability to take down larger risk and partner with us on the larger trade in order to minimise the information leakage and then the subsequent market footprint that we see on our trades.
“There’s a pressing need to interpret data sources in so far as working out what’s reliable, how big offers or bids are available in as opposed to G10 focus, which is much more liquid and more commodifiable and increasing the electronic. It’s definitely a seat that leans more towards the high touch approach certainly from an FX perspective.”
It’s because of these subtleties and the firm’s global remit that global head of trading Gibson confirms outsourcing any or all of the trading desk’s functionality is not likely to be on the cards any time soon.
“If I saw a value of an opportunity in terms of part of the book of business being outsourced I would have to consider it. However, I genuinely just don’t see how outsourced sourcing trading is actually going to lead to better outcomes for the investors,” she explains. “If you outsource your trading, and my trade gets stuck behind a queue of somebody else who’s already been trading it or lumped in with another big block because someone else is trading it there’s no way the client gets a better outcome.
“Ultimately, while I can see the user case for smaller asset managers with more limited trading hours, for a manager of our size with our capabilities, I just can’t see an outsource function coming anywhere close to the execution standards we can achieve for our clients.”
Equities equities equities
Sitting in the European equities seat at Ninety One is Damion Kumarasinghe. Like Willis, his career was forged during testing times. He took his first role at Cofunds in 2000 “just to the tail end of the dotcom bubble bursting” as he puts it. He moved to Investec Asset Management – now Ninety One – in 2004 in an operations role before moving onto the dealing desk covering money markets and some FX in 2007 just in time for the global financial crisis.
“It was really interesting to see how that crisis [global financial crisis] started to emerge in money markets as rates started spiking before it really fully fed through to the other markets. Those were incredibly tough times, with long, exhausting days. It was an intense experience—one I’m glad to have lived through, though I wouldn’t want to repeat it,” he says.
“Each day brought uncertainty about whether our counterparties would be around the next. We were frequently forced to suspend relationships as they teetered on the brink of collapse. It was a chaotic period – banks were reporting record trading days, but for all the wrong reasons. Volumes were huge, but the market was unravelling.”
Kumarasinghe then moved into an equities seat. The desk was a lot smaller then and so oftentimes he would be covering the US and Asia out of London. Market dynamics in Europe are heading in the same direction as the US, he tells The TRADE.
“Larger block liquidity is still very tough to find. You can get volume on screen, but you can sometimes struggle to find the more substantial block liquidity,” he says. “My concern would be that traders are getting more comfortable just trading throughout the day in small size and are reluctant to commit to larger blocks, especially if they cannot be confident that they are seeing all of the prints going through the market. I’m hoping that the consolidated tape helps with that to some degree.
“It [finding liquidity] varies from situation to situation. Often we won’t commit orders fully to a broker. We’ll always keep some on the side just in case any liquidity emerges and we have to be quick move on that liquidity if it appears. We may be working an order with a broker and then we see that we’re not really capturing the volume that’s going through the market and we see it going elsewhere, so we have to be prepared to move our order if needs be.”
With the addition of Sam Spencer who took over trading US equities, Kumarasinghe now only covers Europe. Unsurprisingly, fragmentation – something that has become a poster child for rhetoric surrounding the region – is often front of his mind. Europe, with its 27 member states each with their own venues and players, is naturally more fragmented than the US or Asia. And, as Kumarasinghe notes, new entrants looking to launch platforms and venues in the region must be mindful of their role in exacerbating this.
“It’s a bit disheartening when a new entrant appears without providing any differentiating USP,” he says. “We need to have access to those liquidity sources so once they’re established, we’re going to use them in an all likelihood, but it just makes our job a little bit harder and sometimes fragments liquidity further.
“There are always new entrants looking to come into the market, new intermediaries trying to insert themselves into the workflow. Sometimes that doesn’t necessarily leave us with a better endpoint. It can result in more fragmentation in the market as well as additional layers of fees. There’s a point where you definitely get diminishing returns.”
Technology wish lists
That being said there remain some areas where the traders at Ninety One are hoping to see some innovation. For Wood, the most important future development is seeing frequently used tools such as e-trading or list trading extend into into more niche areas of the market such as loans, CLOs or swaps where flow is still transacted bilaterally.
“There’s a noticeable gap between widely traded products and niche markets that haven’t been as effectively addressed,” he says.
“Technology platforms and banks need to see profitability to continue supporting and advancing those markets. Many banks will prioritise decisions that drive market growth if they see a financial benefit. We’ve seen this with new issuance automation and electronification, which still haven’t reached the desired level of efficiency.”
The traders at Ninety One, both in London and in their offices around the world, have a cohesive and collaborative approach to executing in the markets. The markets have by no means been easy for the last few years but as Gibson says, when have they ever?
“Traders by nature enjoy a challenge. That’s their reason to be. Getting best client outcomes, chasing the best price, finding the best liquidity, the real value add is in those difficult situations and that’s where people get a sense of real and honest job satisfaction,” Gibson concludes.
Given the fact that several of the Ninety One traders have stuck around through multiple financial crises and still come back for more, it appears that may be true.
