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October 1, 2013

Quantitative Difference

How Head Trader Scott Wright's advanced trading technologies and management strategies are driving AXA Rosenberg's growth

By By Mary Schroeder

More than three years after a scandal that gravely damaged its reputation and led to the loss of more than $50 billion in assets under management and almost all its U.S.-based investors, Orinda, Calif.-based money manager AXA Rosenberg believes it is on the upswing.

Outflows have stopped, assets have inched up to $23 billion, and the firm has beaten its performance benchmarks for the past three years.

Back in April 2010, the firm disclosed to clients that a computer error in its quantitative investment process had been covered up by senior managers. A year later, the Securities and Exchange Commission charged the firm with securities fraud for concealing the error, causing $217 million in investor losses.

AXA Rosenberg agreed to settle the SEC charges by paying $217 million to harmed clients, plus a $25 million penalty, and by hiring an independent consultant with expertise in quantitative investment techniques to review disclosures and enhance the role of compliance personnel.

AXA had already seen its assets under management halved to $70 billion in the 2007-2008 period when the whole quant section fell out of favor. With the scandal, it saw another outflow of more than $50 billion, and assets declined to $21 billion in 2011.

There can be opportunity in crisis. In 2010, Axa Rosenberg offered employees a buy-out package and the two co-heads of trading took it. The firm then tapped Scott Wright, who had started there as a consultant in 2005 and began trading in 2006, to head the desk.

Wright, now head of trading for the Americas, focused on managing relationships to make sure AXA didn't lose credibility on the Street.

"I kept relationships current by making sure commission dollars, even though they naturally fell to all-time lows, seemed as though they were being funneled in the right direction," he said. "Because the Street can easily hurt you if you appear to be a wounded dog."

When Wright began consulting at AXA, he had a mandate to integrate FIX into their proprietary OMS and to convince traders it was smarter to send electronic orders than to give them over the phone.

He had a background in trade floor support at Barclays Global Investors and Schwab SoundView Capital Markets, where he supported the electronic trading desk for the program trading group. Among other things, he taught the traders at Schwab how to use algorithms, and that started his career as a trader.

That background has served him well. Will Geyer, now a managing director at ITG and global head of the firm's platforms business, was at one time head of U.S. equity trading at Barclays Global Investors and worked with Wright then. Later, when Geyer was on the sellside, managing Citigroup's global alternative execution business and serving as CEO and president of JonesTrading, Wright was one of his customers. Geyer says Wright "has a broad knowledge of not just trading but also the technology that surrounds it. He has an insightful view of how things work and why things work."