If you are looking for signs of the extraordinary influence that this Texas Panhandle town wields in some of the most competitive and arcane areas of international finance, you are apt to miss them.
In most regards, Canadian population, 2,000 appears no different from other communities on the road north of Amarillo, where the Texas Panhandle drawl wraps itself around the names of places like Pampa and Miami (pronounced my-AM-uh).
A photograph of the high school football team hangs in nearly every shop window. Victorian mansions, the remnants of faded ranching dynasties, stand near brick buildings, one bearing the name of the Women’s Christian Temperance Union and another that houses the Cattle Exchange, a restaurant where customers are drawn by the smell of steaks grilled over burning mesquite wood.
Those small-town qualities, though, are what Salem Abraham hopes will distinguish his hedge fund and stock-index arbitrage operation, based in a 1,000-square-foot, or 93-square-meter, office above the steakhouse, from his competitors. With another hedge fund, Canary Capital Partners of New York, now at the heart of a mutual fund scandal because of its after-market trading activities, Abraham is betting that his firm’s homespun image will be a plus even for his wealthy investors.
It would be hard to find a financial firm in the United States as removed from Wall Street, geographically and culturally, as Abraham Trading. Housed in the same building where Salem Abraham’s grandfather, Malouf Abraham, once chewed the fat with local politicians and ranchers while building a sizable land-speculation business, the company has evolved into one of the most unusual trading operations in the United States.
Yet on some days, the firm’s unit that specializes in electronic trading of stock index futures accounts for an astounding 1 percent or more of the trading volume on the Chicago Mercantile Exchange. All of the trading is conducted through a system of 60 computers connected to the rest of the world through a dozen high-capacity telephone lines.
Abraham’s hedge fund, a separate operation with about $30 million of assets, is not doing so poorly, either. It says it gained more than 86 percent in the 12 months through November after placing successful bets on the direction of cattle futures and the dollar. Abraham devises the fund’s strategies with a team of eight associates, almost all of whom also grew up in Canadian.
No one at the company has an Ivy League degree. Most of the employees at Abraham Trading have backgrounds working at the area’s feedlots or natural gas drilling and pipeline companies. Their training in the complexities of trading and arbitrage is provided on the job by Abraham, 37, who graduated from the University of Notre Dame in 1987 with a degree in finance.
This beats shoveling manure at 6 in the morning, said Geoff Dockray, who was hired as a clerk for Abraham after working at a feedlot near Canadian. The financial markets are complicated, but they’re not as relentless as dealing with livestock all the time.
The emergence of a sophisticated hedge fund in a town where Ford F-150 and Dodge Ram pickup trucks remain the vehicles of choice may come as a surprise. But as much as Texas seeks to retain its mythical attachment to commodities like cotton, cattle and oil, it is increasingly controlled by people who buy and sell financial products.
This trend is best witnessed in large cities like Houston, Dallas and Austin, but perhaps no one exemplifies the state’s transition into 21st-century capitalism better than Abraham, the scion of a family of Lebanese traders that settled in Canadian a century ago.
Abraham often takes potential investors in his hedge fund to his office; to his 20,000-acre, or 8,100-hectare, ranch, which he owns with two brothers; and to his home to meet his wife and children before retiring to the Cattle Exchange to hash out details over a steak.
His sales pitch worked exceptionally well in the early to mid- 1990’s, when Abraham lured investors like Commodities Corp., a futures and commodity investment firm acquired by Goldman Sachs in 1997, to invest in his fund, increasing its assets to more than $130 million
Investors from New York, Chicago and also Abu Dhabi have made the trip to Canadian, which involves flying to Dallas, catching a connecting flight to Amarillo and driving 90 minutes to Abraham’s office.
His down-home approach suffered a setback when his hedge fund had a few years of single-digit returns during the stock market bubble of the late 1990’s. Investors pulled more than $100 million from the fund, causing its assets to shrink by more than 90 percent.
The essence of Abraham’s arbitrage strategy is seeking out minute price fluctuations in the market for futures contracts linked to the Nasdaq composite index and the Standard & Poor’s 500-stock index.
Early investors in Abraham’s fund, which says it has had an average annual return of 24.8 percent since its inception, have done well; $1,000 invested in the fund in 1988 would have grown to about $34,000 today. Not everyone can invest in the fund: It is limited to individuals or institutions with a net worth of more than $1 million
