Entrepreneur trader in Africa? Get yourself a laptop and $10,000

Aly-Khan Satchu is a breezy, likable, investor who has worked through the world of high finance from the City of London to the City of Nairobi with complex trades numbering tens of thousands of trades that made his fortune. Yet he is always ready to break his trade down for the layman; in many ways, that is his strength.

Satchu sees Africa as a land of opportunity for the rising tide of young entrepreneurs in their late teens. For many young Africans, it is easier to imagine going to the moon than dealing profitably in bonds and shares.

“At that age group you need 10,000 bucks,” he says.

“You need a fast internet connection, you need a laptop and a thirst for knowledge because we are existing in a 24-hour world. You will need relationships; you have to set yourself up with a stockbroker. You have to set up with a Forex broker you can do that online in 25, to 30 minutes. You have to have an insatiable appetite for knowledge and analysis.”

These are the basics, he says, cautioning that the success rate for newcomers is not high.

“Then you’ve got to work out where you want to focus on. Sometimes, in my case, I look at too many things and I can get overloaded. Sometimes I am looking at the oil price,  the copper prices, and 400 other things and it means you can miss the opportunities that unfold,” he says.

“Then you have to have good risk management skills, right, you don’t want to bet the whole 10,000 on an outcome about which you feel very confident. The market tends to find your pain points very easily.”

Education or age – do they pose any obstacles?

“I think the education we are talking about; you don’t necessarily learn in a textbook. The market is on a street you have got to learn how to operate on the street. Sometimes there is a mugger waiting around the corner; other times you will hit the sweet spot and you will feel like you are driving a Lamborghini down the street and your $10,000 can become $150,000 before you know it. You have got to be humble, I think because when you get too cocky that is when the problems start.”

Satchu, who studied law at Durham University, has been through the mill in the markets over the last three decades and certainly held the word humble close to his heart when he started out in the financial world in the heart of the City of London.

The good news it was with Credit Suisse, one of the biggest names in world finance; the drawback was it the bad news was it was the lowliest job at the company – manning the printer to print out the documentation for trades by the dealers. He struggled to master printing up to 1200 trades-a-day..

“I come from a very privileged background,” says the son of a lawyer who went to the prestigious Westminster School in London.

“I had never dealt with the mechanics of printers…I just remember having to wrestle with this printer that would break down or start chewing up paper. Then there was this very sharp lady who was in charge and she used to shout at me: ‘You are educated, you have a law degree and yet you can’t manage a printer!”

Yet, after an 18-month apprenticeship as the printer,  providence proved kind to Satchu in his early days in London and he moved up to settling the trades and dealing closely with one of the teams trained with the Nikkei in Japan.

The team, where Satchu cut his trading teeth, was dealing in arbitrage between the Nikkei futures and the value of the index.In short, looking for price gaps to take advantage of.

“I wanted to get on the trading floor and they said they had a slot here. I started trading in the middle area called stop lending and borrowing, which is a middle office type function where you go and source bonds and shares that people are shorting for periods of time so they can settle their trades.

This was joined to the Repo Desk that concentrates on interest rate trading A good Repo Desk would have made a ton of money this year, says Satchu,  through the sharp increases in interest rates by borrowing money and lending collateral throughout the year.

His big break near the end of the 1990s, when he was charged with setting up a Repo desk for emerging markets. It involved lucrative trades like lending Argentina $300 million – against the country’s bonds –  to make its social security payments.

“It was a very exciting period. I took it from zero to a $2.5 billion book paying two percent,” he says.

It was the making of Satchu. Read part two of the story next week of how he brought his trading acumen back to Africa and find out where he sees the opportunities on the continent.