Pine River's Rapid Current: CTO David Kelly

“My job was about tough choices and selective deployment,” Kelly says. “I discovered it’s quite a different management style. Total cliché or not, buy-side firms are just much more nimble than investment banks, period, and I’ve seen sell-side CTOs make the jump and struggle, because they don’t understand how to construct a balance—preserving that agility but leveraging institutional-quality solutions in the right places.”

Minnesota Nice
Kelly stayed at SAC nearly a decade, rising to CTO and managing, at its peak, an IT staff of around 150, about 20 percent of the firm’s overall staff. The experience was a springboard for his next, perhaps somewhat unexpected move—to Thomson Reuters—as chief technologist overseeing a thousand-person-strong deployment of the vendor’s new low-latency Elektron trading platform and related offerings.

“‘Why?’ is the question I get asked a lot,” Kelly says of the 2010 move. The timing was once again impeccable, though. Stepping away from its post-crisis precipice, the industry was reconsidering a new buy-versus-build calculus, rebalanced more heavily toward “buy,” while the latency “race to zero” was putting greater premium on speed.

“Product development was a new challenge, really the third leg of the financial technology stool,” he says.

Still, from that same post-crisis atmosphere a new cohort of specialist funds was blooming, and it didn’t take long before one came calling. The area code, 612, was atypical for a hedge fund—Minnesota. But even beyond its roots in the State of Hockey, Pine River has been unique from day one.

Born in a lakeside cabin with $5.3 million among a group of convertible bonds traders specializing in real estate debt—and so-named after the small town where Taylor, compelled by a non-compete clause, briefly relocated in 2002—Pine River Capital today manages more than $13.5 billion across multiple strategies, operating from eight locations globally with its head office in Minnetonka, a suburb west of Minneapolis. With its assets tripled from a few years ago, and further strategy diversification on the horizon, technology is squarely in the value center column. Kelly couldn’t say no.

30 for 30/70
Playing to his strength, the CTO’s first move was effective positioning.

“Above all, I’m a believer in giving business extreme levels of transparency; prioritization comes next,” Kelly says. “CTOs should control around 30 percent of overall priorities—network design, operating systems strategy, database roadmaps, and programming languages—things that our revenue generators aren’t concerned over in terms of details. The remaining 70 percent of the tech effort is prioritized by the business, and whether bank or hedge fund, here the concept of a steering committee is crucial to revalidate requirements and justify spend.”

A cadre of 30 buy-side IT veterans has flocked to Pine River to meet those priorities. Moving from a pooled to structured tech organization, Kelly has persuaded lead technologists to join from Citadel, Soros Fund Management, Bridgewater Associates, Starwood Capital, and Harvard Management Company, the university’s endowment arm, among others. Most visibly, more than a dozen technologists are now embedded with the firm’s portfolio managers directly—the lion’s share of them based, along with Kelly, in New York.

Gary Makhija, the firm’s head of back-office development who joined Pine River after earlier roles at Bear Stearns and Citadel, says that Kelly’s vision sold him. “He’s a been-there, done-that guy. It was clear David was looking for very particular traits: an institutional knowledge base, specific area expertise, and crystal-clear fluency around business needs,” he says.