D.E. Shaw Jumps into ABS Trading

The line of firms looking to position themselves for what some expect to be a huge high-yield bond market got a little bit longer Tuesday morning. D.E. Shaw & Co., a subsidiary of $39 billion investment firm the D.E. Shaw group said Tuesday morning that it had formed an asset-backed securities unit; leading the ABS charge at the firm will be Richard McKinney, former head of securitized products at Lehman Brothers Holdings Inc (LEH). McKinney departed Lehman last month, and is part of a growing stream of Lehman traders heading elsewhere; Ted Janulis, global head of mortgage capital, announced last month that he will step down from his post, as well. Janulis has been mentioned as a possible successor to current Freddie Mac (FRE) CEO Richard Syron. At D.E. Shaw, McKinney will report to Max Stone, a member of the firm’s six-person executive committee; he’ll be working with former Deutsche Bank (DB) director of bond trading Rocky Kurita, who joined the firm in July as a senior vice president. “We are extremely fortunate to have Rich leading this important effort,” said Mr. Stone. “The asset-backed securities markets are fundamentally changing as a result of the excesses of the past few years, and we think we are well-positioned to build upon our current presence given our analytical rigor and strong risk management.” The firm’s appointments come as Merrill Lynch & Co. (MER) announced its own new hires in the MBS/ABS arena; it’s clear that more than a few Wall Street and investment heavyweights are positioning to trade in the rubble of the private-party secondary mortgage market, as well as to bolster their presence in the agency MBS market. Disclosure: The author was long FRE and held no other relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.