Rokos to Enter the CLO Market as Issuer

Chris Rokos' hedge fund is preparing to launch a business issuing Collaterlatized Loan Obligations (CLOs) in the US, a $1.3 trillion market. The business will be built from scratch.

Jain Global Seeks Regulatory Capital Business

Bobby Jain is launching a new fund led by an ex DE Shaw portfolio manager to invest in bank capital relief trades or SRTs (significant risk transfers), allowing banks to transfer credit risk from their loan portfolios to external investors - it's also known as "RWA optimization". The benefit to the bank is that it reduces the capital it has to hold. Investors receive a premium for absorbing potential losses. "Basel III Endgame" is expected to increase demand for these services.

DE Shaw Looks to Build Out Cogence Fund

DE Shaw is building out its Cogence Fund with $3bn to $5bn over the coming months, with most of the capital coming from existing investors, according to Bloomberg. This will be a discretionary rather than quantitative hedge fund. DE Shaw manages around $70bn in assets.

Activist Hedge Fund Bluebell Closing After Capital Raising Challenges

European activist investor, Bluebell Capital Partners, launched in 2019, is set to close. Co-founders have a background in banking and MBAs from Columbia Business School. In April 2024, they unsuccessfully targeted BlackRock in an attempt to oust Larry Fink.

Griffin Urges Al-Mat to Embrace "Western Values"

Citadel hedge fund manager Ken Griffin has stopped giving funding to Harvard over how it has handled campus protests. He has stressed a necessary return to values of meritocracy, speaking at the Managed Funds Association Conference in Miami.

Trend Followers Triumph in Q1 2024

SocGen has showed quant hedge funds gained 12% for the year to the end of March with positive outcomes for Man Group. Aspect Capital and Winton, helped by soaring cocoa prices.

Elliott Management Sues LME Over Nickel Trade Cancellations

Elliott Management, the hedge fund founded by Paul Singer (ex DLJ attorney, JD Harvard Law School 1969) with over $51bn in assets under management, and that pursues commodities trading as one of its strategies, is suing the LME for $456m over mass cancellation of nickel trades. 

The assertion is that the cancellation was "unlawful on public law grounds". The cancellation occurred on March 8th following volatility that saw prices doubling to over $100k a tonne in a matter of hours. HKEX, the parent company of the LME, dismissed the claim as "without merit".

LME Nickel is now trading (both cash and 3m contract) under $30K a tonne. Nickel is used in alloying to give steel (stainless steel) its corrosion resistant properties. LME Physical futures on nickel trade in 6 tonne lots with the nickel presented required to be Primary Nickel.

Bill Ackman's Pershing Square Stumbles on Netflix Bet

New York based Bill Ackman's Pershing Square (the company he founded in 2004 with $54m)  reversed a $1bn position in Netflix (purchased in January) after the streaming media firm announced an outflow of 200,00 subscribers (partly due to its exit from Russia) generating a 35% drop in share price.  

This exit resulted in a $400m loss for Pershing investors. 

Bill imparted the need to act quickly and pointed to Netflix's "enormous operating leverage" as the reason why future subscriber growth revisions would have an "outsized impact on (his) estimate of intrinsic value". This is not Bill's biggest lost - he had earlier lost $4bn in his stake in pharma firm, Valeant Pharmaceuticals (now renamed to Bausch Health).

In closing, Bill also expressed optimism about the "opportunity rich" environment and confidence in putting the Netflix sale proceeds to good use.

Pershing Square also has a UK closed-end fund, Pershing Square Holdings (PSH), launched in October 2014 on the London Stock Exchange, and whose legal entity is incorporated in Guernsey.

Amazon Swallows MGM for $8.45bn

MGM (Metro-Goldwyn-Mayer), the 97-year old Hollywood studio founded in 1924, and based in Beverly Hills, responsible for "Singin' in the Rain", and "Ben Hur" and owners of the James Bond and Rocky franchise, has been bought by Amazon, in its second-biggest acquisition to date.

Amazon's historically largest acquisition thus far has been the purchase of Whole Foods for $13.7bn in 2017. 

Kevin Ulrich, Chairman of the Board of Directors of MGM, and also CEO of New York based hedge fund Anchorage Capital, and former head of Goldman's distressed bank debt desk, stated it was "an inspiring combination".

So-called "Gamma Hammer" Fund Bets on Dampening Coronavirus Volatility

The fund nicknamed "Gamma Hammer" from Parametric (owned by Morgan Stanley following its acquisition of Eaton Vance) has been selling options in the wake of US stimulus and vaccine-driven expectations of a dampening in volatility.

Andurand Faces Losses on Commodities

Pierre Andurand's office, which closed its New York operations last year, to focus on London and Malta, has faced trading challenges in 2020. His fund lost 20% in 2018 after a strong run. He has previously called IMO2020 a "once-in-a-generation trading opportunity".

GAM buys $4bn AuM Cantab Capital Partners for $290m and starts Systematic Unit

Zurich-based GAM (listed on the Swiss stock exchange and which manages around $120 billion) is acquiring Cantab Capital Partners (CCP), a systematic asset management firm.

This acquisition will form the basis of GAM Systematic - a new offering from GAM covering "traditional" long-only investments as well as alternative investing.

In GAM's investor presentation, a Deutsche Bank 2016 Alternative Investment survey was referenced which mentioned a growing allocation to systematic strategies by institutional investors (the presentation also heralds equity market neutral strategies as offering promising performance in 2016). Coupled with GAM's distribution network, there is certainly scope for GAM to ramp up allocations to its systematic funds.

GAM is also planning UCITS versions of CCP's strategies, UCITS being a form of European-regulated fund first introduced in 1985

The question though is whether performance can be maintained and what capacity constraints exist on the strategies pursued by the funds - according to GAM, the funds are scalable and the capacity constraints are low. This is supported by the proportion of Cantab's employees who are involved in strategy research (high), multiple models and multiple traded markets. Cantab has $4bn AuM as of 31 May 2015.

Melvin Capital forms from the Ruins of SAC

Being formed by Gabriel Plotkin.

MBS Rocks 2012 .. but there are Risks

Mortgage-backed securities outperformed all other asset classes in 2012.

Why would an average person have an interest in MBS? Well, they have an attractive yield relative to Treasuries and Swaps.

The downside is an MBS portfolio requires active management. Additionally, mortgage analytics are needed for this, as is research into the housing market.

The risks of investing in MBS

MBS are subject to prepayment risk (which shortens the life of the security), When interest rates are falling, prepayments tend to rise.

Hedgies on the Move

BlueCrest Capital (the third largest hedge fund manager in Europe, size $15.5bn) founded in 2000 by Bill Reeves and Mike Platt of JPMorgan (not to be confused with Bill Reeves, one of the founders of Pixar), is relocating 50 out of 300 staff to Geneva. Brevan Howard, Europe's largest hedge fund, also expressed similar desires earlier in the year.

Hedge Funds by Size

1. Brevan Howard
2. ???
3. BlueCrest

Shell posts highest ever annual profits for a European company, Ford posts worst loss in its History, Hedge Funds Unleash Recessionary Innovation

Oil giant Shell posted a Q4 loss (the first quarterly loss for 10 years) with oil prices falling to a record low.

NEVERTHELESS, annual profits reached a RECORD level up 14% from $27.6 to $31.4bn. Shell warned conditions remained "challenging". CEO Jeroen Van der Veer,born in Utrecht, boosted dividend by 11%. He said the company would continue "competitive and progressive dividend payouts". Oil is trading below $50 after a record high in mid July 2008 of $147.

China Premier's Wen Jiabao's comments at Davos, that the country had been hit hard by the world financial crisis, raised concerns on falling demand for oil. he also commented that financial regulators had failed to keep pace with "financial innovation" thus facilitating the credit crisis.

Offsetting Shell profits, Ford posted a full year loss for 2008 of $14.6bn, the worst ever performance in its 105 year history (FMC was incorporated in 1903). US rivals GM and and Chrysler have received billions in emergency bailout funding from the US government.

Ford pioneered the moving assembly line, allowing workers to stay in one place and do the same task repeatedly.

Meanwhile, hedge funds fight back with "recessionary innovation" to entice investors "sitting on the sides" in this recession. Osmium Capital Management, a hedge fund based in Bermuda, with $178m worth of assets under management, is launching a new class of shares denominated in troy ounces as opposed to euros, dollars or sterling. The fund hedges its exposure to gold by selling gold for cash and buying gold forward on a monthly basis.

Madoff Makes Off with $50bn Making Investors Mad

Bernard Madoff, it has been alleged, ran a $50bn Ponzi scheme (named after Charles Ponzi, who emigrated to the United States from Italy in 1903). If found guilty, this is will be the biggest Ponzi / pyramid scheme in history. The SEC described it as a "fraud of epic proportions".

US hedge fund Tremont Group Holdings, had a reported $3.1bn exposure to Madoff.

The idea of a Ponzi scheme is to pay high returns by passing subscriptions in to existing clients rather than putting them into a portfolio, a strategy that results either in complete collapse or bailout.

Madoff claimed he was using a "split strike conversion" strategy to generate his returns. In fact he was faking his trades in an IBM AS/400 computer. Madoff also ran a London operation MSIL, or Madoff Securities International Limited. Madoff was an ex-non-executive chairman of Nasdaq.

Hedge Fund Redemptions Rise, Soros: "The Hedge Fund Bubble Has Burst"

BlueBay, the publicly-quoted hedge fund with $21bn AuM at the end of September, is closing its Emerging Markets Total Return Fund run by Simon Treacher, after it reported a 53% loss, most of the losses occurring after the end of September. In NY, Satellite Asset Management stopped client withdrawals from its three largest funds, in a report from City AM. Asset manager BlackRock is looking to make around 200 job cuts, the "first major round of redundancies in the company's history". Fidelity also announced it would cut headcount by 3000 by early 2009.

A fund manager commenting on the hedge fund industry remarked: "It's going to be difficult for them to reinstate fees once the industry has turned around". Investor George Soros ("the man who broke the Bank of England", making $1bn betting against the pound, following the UK's unwillingness to raise rates to ERM currency levels, forcing Britain to withdraw from the ERM and devalue the pound) declared that the "bubble has burst" for hedge funds.

In other news, HSBC (the world's local bank) is looking to buy back its Canary Wharf HQ which is sold to Metrovacesa for £1.09billion.