By getting in the flow of things you will make money. That's what Oded Levy, a trader at Oracle Partners, tells the two other traders on the desk at the New York-based hedge fund specializing in the healthcare industry. Founded in 1989, the fund manages in excess of $600 million from high-net worth individuals, healthcare executives, and academic endowments. Over the past decade it has appreciated at a 30 percent net annual compounded rate.
Besides earning profits, Levy said "by staying in the flow of things the trader is able to generate ideas. He hears what's going on and is able to pass on this information to other people in the firm who can do more analytical work."
If a buy-side trader is noticing positive results with a stock that he is trading he can go to the portfolio manager and suggest that he study the company further, Levy says. "This trade then becomes a position," he explained. "What you did was generate an idea, you made money, and you turned the trade into a position."
Levy, who was born and raised in Israel, earned his undergraduate degree from New York University and his MBA from NYU's Stern School of Business. He began his Wall Street career with Bear Stearns as an associate analyst in its corporate finance department. Levy then moved onto a firm in Houston, Texas called Maxxam Inc., where he performed leveraged buy-outs and risk arbitrage. He credits Charles Horowitz, Maxxam's president, with teaching him the ins and outs of trading. "That was an extremely good experience," Levy said. "Charles [Horowitz] is one of the smartest financiers around."
Before joining Oracle, Levy was a trader at Genesis Merchant Group of San Francisco, an investment banking boutique, where he worked with legendary trader, Will Weinstein. "I learned from the sales side how things get done," Levy said. "I covered a lot of the accounts and traded a lot."
He envisions a new approach to buy-side trading in the 21st century as invaluable financial news becomes more and more accessible through the Internet.
"The buy-side is getting much faster and more diligent in the way it does business," he said. "Execution is much better and there is no longer any lag in getting research. Today, I get research in my e-mail from every brokerage firm in the country." Levy added, "At a hedge fund today what you need on the desk are traders who are profit centers. You allow them to trade proprietarily for the firm. Basically, as decision makers."
Although execution is vitally important to profitability, said Levy, it's not that difficult. "The key thing about execution is liquidity and going to the right place to execute," he noted. Oracle taps about forty brokerages to execute its trades, but regularly uses only about ten to fifteen firms.
Levy said that since Oracle pays for research "we want to pay people who are providing us with some value-added information or for their ability to quickly execute trades."
Undoubtedly, alternative trading systems, such as electronic communication networks, are dramatically changing the relationship between buy-side and sell-side firms. Levy said one of the main advantages of trading with an ECN is the anonymity. From years of experience, Levy has learned that information on Wall Street has a way of circulating quite quickly. That's why Oracle executes some of its trades through ECNs. But he cautioned that "you can't get liquidity by only trading with ECNs."
What makes a top-notch buy-side trader? According to Levy, the ability to anticipate events. "I don't want to wake up in the morning and find out that I didn't know a company was going to announce its earnings or have an important conference call." He added, "The worst thing that can happen to a trader is to be surprised by something he should not be."
Investment bankers like to think of themselves as the "masters of the universe." Levy sees the role of the buy-side trader as "the center of the universe." "The trader has to wake up someone when the stock does something differently," he advised. "The trader always has to get information from people."
Oracle's Fifth Avenue offices look out across the Plaza Hotel and Central Park.
Levy usually arrives at his desk by seven in the morning. "I have no problem ever getting here. I live only a few blocks away," Levy quipped.
