How the pandemic and war helped Alex build a $9b fortune

The low interest rates and government stimulus that drove Wall Street’s record trading profits during the pandemic may have faded, but volatility remains high.

And that’s creating enormous fortunes.

One beneficiary has been Alex Gerko, the founder of quantitative trading firm XTX Markets. His London-based company handles almost $US300 billion in daily volume across equities, commodities, currency and fixed income. It paid out a dividend of almost £1.3 billion ($2.4 billion) in March — more than triple the amount from a year earlier, according to accounts filed with Companies House.

Since 2020, more than £2 billion of those dividends have gone to a Caymans Islands-registered company controlled by Gerko, helping him build a fortune of $US6 billion, according to the Bloomberg Billionaires Index. Both Gerko and XTX are UK tax residents.

Tim Moxon, a spokesperson for XTX, declined to comment on Gerko’s net worth.

It’s been a quick rise for Gerko, 43, who founded XTX seven years ago and owns 75 per cent of the firm. A Russian native who’s now a British citizen, he received a doctorate in mathematics from Moscow State University. Gerko began his career trading equities at Deutsche Bank AG and later shifted to foreign exchange. He left in 2009 to join hedge fund GSA Capital before starting XTX.

The firm he built eschews discretionary traders and instead seeks to automate as many processes as possible while using statistical models that analyse “trillions of noisy observations” of data for trading. Its headquarters boasts a replica of the Apollo 11 landing capsule, along with climbing walls, arcades and sleep pods.

The company, whose 2021 profit increased 42 per cent to £667 million from a year earlier, is expanding and has offices in New York, Paris, Singapore, Mumbai and Yerevan, Armenia. In the US, Gerko has been a vocal proponent of banning payment for order flow, the controversial practice in which market makers pay brokerages for trades from their retail clients.

XTX has built a strong position in FX and European equities, said Larry Tabb, head of market structure research at Bloomberg Intelligence.

“They are expanding into US equities, but the market is a bit more crowded,” he said.

Volatility from the COVID-19 pandemic and Russia’s invasion of Ukraine has led to boom times for trading desks. Citadel Securities, a market-making firm founded by Ken Griffin, hauled in a record $US4.2 billion in net trading revenue in the first-half of 2022, up 23 per cent from a year earlier. Citadel Securities, which competes with XTX, was valued at about $US22 billion in a January funding round.

Meanwhile, fixed-income revenue at the five largest US banks surged in the third quarter to a record for the three months through September as uncertainty around inflation and the path of monetary policy created volatile market conditions.

XTX, which employs more than 170 people, is spreading the wealth around: About 24 partners in the firm shared in a £557 million profit pool last year. Gerko runs XTX with co-Chief Executive Officer Zar Amrolia, also a Deutsche Bank alumni.

Gerko is the founder of Mathematics Education for Social Mobility and Excellence, a nonprofit that provides enrichment programs for high school students. XTX has also set up a £15 million academic sanctuary program for students and researchers displaced by Russia’s attack.

Oxford University said on Monday that XTX was sponsoring a new Maryam Mirzakhani scholarship program for female mathematics PhD candidates, commemorating the life of the Iranian mathematician who was the first woman to win the Fields Medal.

Bloomberg

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