Knight, who left Deutsche on December 6, will join a leading New York-based hedge fund as a portfolio manager in the new year, according to people familiar with situation. Deutsche named Russell Lascala, head of global finance and FX for Japan, as Knight’s replacement, a role he will share with Philip Wood, reporting to Kevin Rodgers, global head of FX.
Lascala is an experienced spot FX manager, having held a senior role at Citi before joining Deutsche. He will maintain his existing role in addition to his new responsibilities.
Knight joined Deutsche in 1999 from Bankers Trust (BT), after the German bank acquired the US investment bank in late 1998. At BT, he had been a member of the proprietary trading group. He began his career as a spot trader with the National Bank of New Zealand in 1989.
After stints in Sydney, London and New York with Deutsche, Knight returned to London in the summer of 2008 to become head of the emerging markets and G10 spot joint venture, and was promoted to his most recent roles at the start of 2009.
During this period, Deutsche dominated the FX markets, in terms of market share, holding 21% in the 2009 Euromoney FX survey, almost 6% more than UBS in second place. Despite increasing competition from UBS, Citi and Barclays, it has maintained its leading position.
This year, the bank launched its latest version of its leading FX platform Autobahn, and introduced a new API, Rapid, which it says will revolutionize how it prices and risk-manages its currency-trading business.
Since 2009, Knight was responsible for growing the bank’s FX risk, and gained a reputation for his strong people-management skills and his ability to attract a number of highly talented traders to Deutsche, while also being able to retain traders, amid constant interest from the wider industry for their services.
He was also instrumental in developing the bank’s client-facing spot execution service, which gave Deutsche’s most-active clients direct access to spot traders.
Global macro hedge funds, which aim to profit from shifts in the global economy by trading a range of instruments – including bonds, interest-rate derivatives and currencies – have fared particularly poorly in recent years.
This has been put down to, among other things, being distorted by central bank attempts to respond to underlying weakness in the global economy by repeated rounds of quantitative easing coupled with near-zero official interest rates.
Prominent hedge fund managers, such as Louis Bacon and George Soros, who helped create the model for macro strategies, have in recent times been returning money to investors.
In August, Bacon told investors that his fund, Moore Capital, would return $2 billion, or about 25% of the money in his main hedge fund, to investors after returning just 1.6% this year through to July.
According to Hedge Fund Intelligence, a sister publication to EuromoneyFXNews, macro strategies have returned 2.12% up to the end of November.
With that in mind, hedge funds might look to focus more on shorter-term trading strategies, rather than more medium-term macro-based plays. Currencies are likely to play a leading role in this, due to better liquidity characteristics and lighter capital constraints under new regulatory requirements.