Spotlight: Ex-Knight Capital Program Trading Head Shaw on the Launch of His Hedge Fund

John Shaw III, chief executive officer of New York-based Castle Capital Management LLC, spoke to Bloomberg’s Nathaniel Baker July 19 about his hedge fund. The former head of program trading at Knight Capital discussed the fund’s relative value strategy and how it has gone about raising money.

Q: Your fund is relatively new, launching Jan. 3.  What was the impetus for starting it?

A: Starting a hedge fund is a direct result of the business shift away from risk and proprietary trading in the banking industry. It’s also something I’ve always wanted to do. It’s nice to build your own business and to provide your part, which I think is needed in the market. The strategy that we provide is an absolute return product with low standard deviation of returns. In the current market, investors are faced with an extremely volatile S&P and they haven’t made any money over the last six years. To us, when there is uncertainty in the market, this provides our fund an opportunity to profit. We offer a product that’s uncorrelated to the market and provides downside tail risk protection. The other thing that people want is liquidity. You see the emergence of UCITS products in Europe, which offer one-day liquidity and transparency. We offer that in the context of our hedge fund. Our skills are in the area of risk management. Chief Investment Officer Kraig Tuber and I both worked at very large banks and had significant amount of capital at risk so risk management was key.

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