"We preferred to stay together, but as the Volcker Rule emerged it became clear that would not be permitted," says Jim Rosenthal, Morgan Stanley's chief operating officer, who led the last round of negotiations with Muller.
Over the next few years Muller engaged in on-again, off-again negotiations with the Wall Street firm about their operating arrangement. It also gave birth to the Volcker Rule, a piece of legislation designed to make it impossible for a proprietary trader like Muller to work at a bank like Morgan Stanley. But 2008 exposed the danger of being dependent on one client, namely Morgan Stanley. There was also the tricky issue of the intellectual property Muller developed but Morgan Stanley owned. He couldn't invest his own money in PDT, but he was well-paid, receiving a cut of his unit's profits, and could singularly focus on solving market puzzles. But working for Morgan Stanley always appealed because he didn't have to worry about raising cash, appeasing clients or back-office details. He had produced the kind of returns that would have made him a billionaire had he been an independent hedge fund manager. "Morgan Stanley Star Is Among Those Battered No Time for Music Now," the Wall Street Journal 's front page blared.Īs with many on Wall Street, the financial crisis changed the game for Muller. Under pressure from Morgan Stanley, Muller was forced to liquidate part of his portfolio. Unfortunately his return just about coincided with the quant meltdown of 2007, when the precipitate drop in subprime mortgage securities triggered deep losses for many firms. Muller then rolled up his sleeves and came back full-time to PDT in 2006. The soul-searching lasted about seven years, and Muller says it sent his trading operation into a period of stagnation. Muller today likens it to a kind of executive chairman position that left him time to do other things, such as practice yoga and produce two music albums with titles like Just One Lifetime. After returning in 2000 he spent the next several years essentially as an advisor to the fund he created, PDT. He went on sabbatical, rediscovering his love of music partly by busking in New York subway stations and sojourning in far-off places like Bhutan. "I was out of balance personally," Muller says. By 1999 Muller started to feel like he could no longer find happiness on Wall Street.
Crossword puzzles became an escapist obsession he even created them for the New York Times. His mind became so overloaded with mathematical formulas that he could no longer play music. in part because the pressures of work were overwhelming. He detached from the office at a second home in Westport, Conn. "He also has very high expectations of himself and other people."Īs Muller gained success and autonomy at Morgan Stanley his behavior became somewhat erratic. "He is really smart, but a lot of smart people get lost in theory," says Kim Elsesser, a computer programmer and mathematician from MIT, and Muller's first key hire. He thought and talked about it all the time-couldn't even sit through a Broadway show without stressing over it. Muller became intensely focused on figuring out patterns that could help him beat the market. Muller was able to carve out his own quiet area at Morgan Stanley's Manhattan headquarters, where his team of math nerds could dress casually away from the bank's testosterone-fueled, high-octane trading hordes. Nobody outside the bank knew it, but for a long time Muller was Morgan Stanley's supersecret weapon, making big contributions to its earnings each year, hidden in the firm's income statement under "principal transactions." "When people buy or sell in a desperate or hurried fashion, it tends to be helpful to us," says Muller, who is otherwise tight-lipped about what has gone right this year. His research chief has just left his office after telling Muller about a promising finding that could lead to the improvement of one of PDT's main models. He is wearing a gray sweatshirt and jeans and has a Zen-like calm. Muller is sitting in his Manhattan office. stock market has given back all of its gains, and hedge fund managers around the globe are wringing their hands in anticipation of sending out another batch of disappointing investor letters. "To take money out of the market with as little risk as possible and build a place people who are smart are drawn to." Muller's niche formula has also let him take plenty of money out of the market personally: Forbes estimates that in the last three years alone he's made $200 million before taxes, including gains on his own capital. "Our goal is to be the best quantitative investment firm on the planet, but not in terms of number of assets, in terms of quality of the products," says Muller in his first interview since opening his new firm.
0 kommentar(er)
