HSBC's Maldonado blends science with art

An Oxford doctor in laser physics who trod the well-worn path from academia to high finance, Maldonado resisted the obvious choice of becoming a quant, instead opting to transfer his number-crunching skills into a more "front office" role in fund management.

The results have been impressive.

Maldonado was the designer behind the UK's first equity-linked TESSA and capital-protected PEP (both tax-advantaged products), he was named European fund manager of the year in 1994 by one publication, and, most significantly, in 1999 he pioneered HSBC's early-stage move into hedge funds. Mixing the detailed analysis and intellectual rigour he learned from science with fun and creativity is key, he believes, be it when developing new products, deciding which one or two fund managers to hire from 50 or more meetings a year, or in his extracurricular hobbies.

"I really love flying ... There's an art to flying, it's fun, it can be exhilarating but you need to be analytical and technical. I love riding motorcycles -- I love the adrenaline but it's also very technical," he told Reuters.

"And I think finance and hedge funds are like that -- it can be exhilarating but you also need to be very thoughtful and analytical about things."

LIFT OFF

Ecuador-born Maldonado, whose father's work as a diplomat took the family to Uruguay, Peru and eventually the UK, kicked off his own career by studying lasers for use in high-speed photography as part of his doctorate.

The work, which produced a couple of niche discoveries on the colors these lasers emitted, led him to an artillery range on an island off the Essex coast, where he would photograph rockets, missiles and bullets as they were fired.

However, academia proved not to be the right fit.

"I decided after all that that the academic lifestyle didn't suit me and went to work for a high tech spin-off from the Clarendon laboratory," he said.

"They paid for me to do an MBA and I thought that was brilliant and I fell in love with finance. I knew straight away that's what I wanted to do."

Maldonado was recruited by a manager at James Capel whose policy was only to hire PhDs, and went on to run a volatility fund, develop structured products and index funds, and help start up the firm's multi-manager business.

However, it was in October 1999 that he launched a merger arbitrage fund and a UK long-short fund, pioneering the group's move into a small industry that, at its peak last year, was to command some $2.6 trillion in assets.

"1999 was really the lift-off point for the European hedge fund industry, it was really the year it ignited. That year and the following were very strong growth years for the industry.

"We were really early, we were amongst the first. You could see that it was something that was going to be big but I don't think any of us realized quite how big it would be."

Maldonado's rigorous approach to finance has led HSBC to take a slower approach to asset gathering than some firms during the early years so as to focus on risk management.

However, while terms such as systems and infrastructure were out of fashion before the credit crisis, after the Madoff fraud, Maldonado's focus here seems very well placed.

"We didn't want to grow the business without having strong risk controls in place ... so in the early days we deliberately grew the business a lot more slowly than some of our competitors," he said.

"With hindsight I might say we should have grown the business more quickly, but we've never had a blow-up, never had so much as a trading error, never broken a limit... If we had grown it more quickly ahead of the infrastructure ... I'm not sure I'd be able to claim the same level of success."