white men with money

Boaz Weinstein Proves Failure Is an Option

Of the half-million Americans thrown out of work last month, how many do you think single-handedly cost their employers $1 billion? Likely answer: none. Because those guys don’t get fired, they get to leave in good standing and start their own hedge funds. Or at least that’s the story of Boaz Weinstein, a 35-year-old trader for Deutsche Bank who lost $1 billion last fall on bad bets in the credit markets. According to the Journal, his employer announced today that Weinstein was leaving the firm of his own volition, along with fifteen of his co-workers, to take advantage of the once-in-a-lifetime profit opportunities the current market presents.

Weinstein’s departure confirms something old and new about Wall Street. The old: That there is nothing disgraceful about losing a ton of other people’s money, provided you didn’t steal it. The new: That institutions like Deutsche Bank can no longer afford to operate like hedge funds in disguise. Their proprietary trading desks, where they gambled with abandon and made massive profits in the good years, are being more or less dismantled. That will accelerate the talent drain from big institutions to boutique shops.

According to the Journal, Weinstein had been a big moneymaker for years, exploiting price discrepancies in companies’ equity and debt — these margins are usually quite tiny, but if you pile enough leverage into the trade, you can make major coin. Unless, of course, the markets get all jangled up like they did after the Lehman Brothers collapse. Weinstein’s troubles were remarkably similar to those that humbled Citadel, the giant Chicago hedge fund whose main unit dropped more than 50 percent last year.

Weinstein’s reputation apparently remains intact. Bill Ackman of the hedge fund Pershing Square Capital told Bloomberg that Weinstein is “in the top one or two people in the credit business,” and a Deutsche Bank spokesperson said the firm looks forward to “working with” him.

Deutsche Bank’s Weinstein to Leave, Start Hedge Fund [Bloomberg]
Weinstein to Leave Deutsche Bank, Start Fund [WSJ]

Boaz Weinstein Proves Failure Is an Option