Risk Awards 2020: The winners

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Life is getting a little harder for global investment banks. In a market prepped for the end of the economic cycle, spreads are thin and trading perilous. To boost revenues, dealers must innovate and carve out new markets.

This year’s Risk Awards offer plentiful examples of firms doing just that.

Goldman Sachs – our interest rate derivatives house of the year – established itself as the go-to dealer for swaps linked to the US dollar Libor replacement, the secured overnight financing rate, or SOFR.

The market is nascent, and volumes are low, but Goldman has unlocked liquidity by co-locating its swaps, repo and short-term macro trading desks. This allows the firm to match off flows in these correlated but very different markets.

For example, when US repo hit 10% on September 17, the desk generated liquidity by matching off risk between total return swaps and SOFR futures. At times, it has even used repo and cross-currency basis trades to offset SOFR flows.

Location of desks has been a theme for another of our winners, but for a different reason. Bank of America, which scooped our blue riband award for derivatives house of the year, shifted a big chunk of its headcount to a new trading hub in Paris. The office opened early this year.

Around 400 staff have already relocated there, roughly half them in front office sales and trading roles across fixed income, currencies and commodities (FICC) and equities.

It was a big investment, one that spoke volumes about BofA’s commitment to its mainland European clients. “Our European strategy is clear. We want to be here. We want to be local,” says Bernard Mensah, co-head of global FICC trading and president of central and eastern Europe, Middle East and Africa at BofA.

That strategy is already paying dividends. BofA has increased its market share in euro swaps, launched new products – including its first Swedish krona callable bonds – and grown its book of Schuldschein loans and other structured notes.

In equity derivatives the bank made its mark via innovation. Notably, it reinvented the short volatility trade with its Synthetic Uncorrelated Volatility (SUV) index. The strategy, which decorrelates from the equity market at times of stress, is designed to weather episodes such as the ‘Vixplosion’ that wiped out similar products in February 2018. It secured more than $1 billion in client mandates in its first 10 months.

“The SUV product is the first short vol strategy with negative downside correlation on a macro level,” says Fabrizio Gallo, BofA’s global head of equities. He adds that the instrument is a good example of the firm’s “product innovation capabilities, which are driven by client needs”.

Innovation was behind the success of BNP Paribas in the currency derivatives category. The French bank has worked on visualising data from spot markets to help improve derivatives hedging. Its new tool proved valuable when the Japanese yen crashed at the turn of the year.

Traders at the bank noticed the currency was diving during a period of poor liquidity, which caused them to delay hedging their options book until market depth returned. Avoiding a damaging knee-jerk response enabled BNP Paribas’s G10 foreign exchange options desk to record one of its most profitable weeks of the year.

Other banks have also added new skills or ventured outside their comfort zones in search of growth. In credit derivatives, Barclays has long been a force in the flow business. That hasn’t changed – “they generally offer the best research and liquidity”, says one client in the US – but the firm has also added many more strings to its bow.

“We’ve really been on a journey for the last four years to evolve and grow our product set,” says Adeel Khan, the firm’s global head of credit.

In the past 18 months alone, the firm relaunched or re-entered a range of products it exited after the financial crisis, including credit-linked notes, total return swaps, structured financing and derivatives linked to the CMBX index of commercial mortgage-backed securities.

Many of our awards recognise the efforts of a team, but the lifetime achievement award goes to an individual. This year’s recipient is European Central Bank board member Benoît Coeuré. As the ECB’s head of market operations since 2012, Coeuré was a key architect of the central bank’s massive bond-buying programme, which ultimately helped the eurozone emerge from its long-running sovereign debt crisis.

Coeuré is a strong proponent of innovation in finance. At the ECB, he was involved in a project to develop a digital currency backed by the euro. He will continue that work in his new role as head of the innovation hub at the Bank for International Settlements.

Two further individuals – Andrei Lyashenko, head of market risk and pricing models at Quantitative Risk Management, and Fabio Mercurio, head of quantitative analytics at Bloomberg – win the quants of the year award for their work in extending interest rate modelling techniques to alternative overnight benchmarks. Their forward market model – an extension of the classic Libor Market Model – allows forward values to be simulated from both forward- and backward-looking alternative reference rates, solving one of the biggest problems of Libor transition.

As always, picking the winners was extremely difficult. Risk.net asked candidates to submit detailed information on their businesses, and shortlisted firms were interviewed off the record. Risk.net then gathered feedback from clients and other market participants.

The final decisions were made by Risk.net’s editors and journalists, weighing a number of factors, including risk management, creativity and innovation, liquidity provision, quality of service and customer satisfaction, and engagement with regulatory issues.

Where decisions were tight, client feedback often helped settle the issue. The Risk.net editorial team thanks all this year’s participants for their time and help. The profiles of our winners can be found below.

Keep checking back as we add the final articles over the next few days.

Derivatives house of the year: Bank of America

Lifetime achievement: Benoît Coeuré

Quants of the year: Andrei Lyashenko and Fabio Mercurio

Interest rate derivatives house of the year: Goldman Sachs

Currency derivatives house of the year: BNP Paribas

Equity derivatives house of the year: Bank of America

Credit derivatives house of the year: Barclays

Inflation derivatives house of the year: HSBC

Structured products house of the year: Societe Generale

Risk solutions house of the year: NatWest Markets

Research house of the year: UBS

Innovation in execution: Morgan Stanley

Rates flow market-maker of the year: Citadel Securities

Equities flow market-maker of the year: Citadel Securities

Quant investment firm of the year: GAM Systematic Cantab

Currencies flow market-maker of the year: Credit Suisse

Hedge fund of the year: Hildene Capital Management

Investment product of the year: Credit Agricole

Hedging adviser of the year: Chatham Financial

Buy-side risk manager: Vanguard

Sovereign risk manager of the year: Senegal’s Ministry of Finance and Budget

Insurer of the year: Pension Insurance Corporation

Bank risk manager of the year: HSBC

Credit portfolio manager of the year: NatWest Bank

Rising star award: Blanka Horvath, Aitor Muguruza and Mehdi Tomas

Interdealer broker of the year: BGC Partners

Exchange of the year: Eurex

Exchange innovation of the year: CME Group

Clearing house of the year: LCH

Clearing house innovation of the year: Ice

OTC client clearer of the year: Bank of America

FX prime broker of the year: HSBC

OTC trading platform of the year: Tradeweb

OTC infrastructure service of the year: UnaVista

Law firm of the year: Allen & Overy

Technology vendor of the year: Murex

Fintech start-up of the year: Baton Systems