Sam Berberian is a 2007 graduate of MIT who has a degree in mechanical engineering and finance which means that he was in high school when the dot com bubble burst; now, he is the person tasked with helping rescue Citigroup’s junk bond desk.
After graduating from MIT, the Toms River, NJ native started work at Goldman Sachs, eventually becoming co-head of Goldman’s high yield desk. But according to Bloomberg, he is now on his way to Citigroup, where he was poached to join veterans Joseph Geraci and Mickey Bhatia to “rescue” a credit desk that has one of the “deepest benches” of anyone on Wall Street.
Sam was part of a team that had found success at Goldman Sachs, including his colleague Thomas Malafronte, who made $300 million for the firm in 2016 – an outside amount in the post-Volcker Rule days – but the team, some disillusioned by the compensation they were receiving, has parted ways, leaving Goldman Sachs with a large vacancy where its credit desk used to be.
Berberian, a prized trader who was co-head of Goldman Sachs’s high-yield desk, joins Citigroup just as defections have hollowed out its junk-bond team. Kelly Maier, Brian Funk and Faraz Naseer, among others, have left. Some were poached by competitors while others left after grumbling about compensation, according to people familiar with the matter. The good news for Berberian is his appointment comes at a time when higher volatility and looser regulations offer a bright outlook for the desk.
Why did Citi have its sights set on the youngster? Berberian is known as “a money maker”, and an expert in trading telecom debt. He has also played an important role in helping Goldman try to expand away from just hedge fund clients, helping it add “more real money counterparts” to the bank’s client list.
But it was his expertise in trading CDS that made him most marketable: he joined Goldman at a time when single name CDS were still in vogue. However, as the CDS market has shrunk dramatically, those Wall Street traders well-versed in single-name credit-default swaps, as well as making markets in cash bonds, has been shrinking rapidly in the last few years.
And here is the punchline: as Bloomberg notes, products like CDS – which basically allow traders to short credit without the hassles of finding borrow in an illiquid market – tend to be more popular during bear markets. With expectations of an eventual turn in the credit cycle, banks are seeking out traders with expertise in cash-bond trading and derivatives.
In short, the hire is evidence that Citi believes the market is about to turn and is ramping up the one part of its credit trading desk that should benefit when shorting credit is back in vogue.
That was one of the reasons Citigroup was keen on giving Berberian the leadership role, according to people familiar with the matter.
What makes Sam unique, perhaps, is his ability to make money in up markets too: as a result, he was among a class of traders who Goldman Sachs promoted to the ranks of managing director in 2015, alongside the abovementioned Thomas Malafronte, Berberian’s co-head on the high-yield desk. Needless to say, he was very much sought by not only Goldman, but its clients.
Just last month, Berberian was hobnobbing with some of Goldman Sachs’s most important leveraged-finance clients at its premium conference in the coastal California hamlet of Rancho Palos Verdes.
A question one may ask is if all Berberian did was “flow” trading – which is what Goldman was permitted to do under Volcker – a commoditized, realtively low-profit venture, then why the star status, unless of course Goldman cut corners here and there…
In any case, Citi is delighted with its new hire: “The addition of Sam joining our deep, talented bench in credit has us poised for being able to deliver to our clients across the spread-products division,” Bhatia said in a statement.
In any case, congratulations to the young star trader who was was graduating college around the time Lehman went bankrupt: for the sake of all those who still remember what a “normal” market looks like and when shorting credit was still a profitable trade and not frowned upon by the ECB, we hope that Sam will be put to lucrative, CDS-buying use very soon.
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