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: 0.00 N/A).

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: 1.14 -1.72%) 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: 73.38 -2.69%) 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: 11.78 0.00%) 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.