Natalia Kniazhevich’s Post

Hedge fund Brevan Howard is parting with an ex-JPMorgan MD @Alfreido Saitta's time at Brevan Howard appears to be coming to an end, but the hedge fund is still adding investment talent to other teams. Bloomberg reported yesterday that Brevan has shuttered Saitta's fund after it lost 4.9% in the first quarter following what appears to have been failed bets on falling rates. Saitta is leaving once the fund has been wound down, even though Louis Basger who ran another Brevan fund and lost 7.8%, is staying. Prior to joining Brevan Howard in 2011, Saitta was a managing director in rates trading at J.P. Morgan or five years. Before that, he was a director in short term interest rates trading at Citi After long years of rates traders moving from banks to hedge funds, Saitta's exit from Brevan Howard is a reminder that hedge funds are not an easy option. Traders have now started moving in the opposite direction. Yun Zhou a former macro portfolio manager at Brevan Howard, for example, recently reappeared as Citi as New York-based MD in rates options trading. While Brevan Howard has been ejecting underperforming portfolio managers, particularly in systematic macro, and cutting some middle office staff, it's also hiring. It recently added Leon Haack a London-based credit analyst from rival hedge fund Balyasny Asset Management L.P. Brevan Howard has two large key multi-manager funds: the Master fund, a macro fund with approximately $12bn in AUM, and the Alpha Strategies fund with approximately $12.5bn in AUM which is more relative value leaning with limited directional risk. The fund has hired heavily in recent years, particularly in the Alpha Strategies fund with people added across credit, systematic, emerging markets and commodities. #peoplemoves #hedgefund #brevanhoward #jobs

"Comparing multistrats which include truly uncorrelated strategies to mortgage tranches with the same underlying risks is a bit disingenuous." It's a lot easier to say that strategies *were* uncorrelated than to say that they *will be* uncorrelated; conflating the two (i.e. assuming stationarity of covariance structure) is precisely what led to those MBSs melting down. Mortgage default events were attributed to unmodeled within-subject variance rather than being driven by some exogenous effect on the whole thing. Whoops. I agree with the general thrust of the post but I think it's too credulous with regard to the diversification benefit of multistrat investment. For the most part, the PMs all have access to the same data/infrastructure and they have similar compensation incentives; i.e., there's way more upside than downside. Get a few big wins and you have an eight-figure net worth; if you burn up you can probably still pick up an individual contributor position paying mid-six-figs since you have "end-to-end" experience and can set up and deploy strategies. May as well roll the dice.

The election of Donald Trump in November ended up being more conclusive than commentators predicted prior to election night. One cohort that celebrated that result was the hedge fund industry. A report from Reuters showed some of the largest funds made significant gains in the month on the back of the result. Morgan Stanley show that global hedge funds are up over 10% YTD (as at end of Nov). Discovery Capital, run by Rob Citrone (ex Tiger Management) jumped 14.5% and is up over 46% for the calendar year. Hedge fund allocation has always been a divisive subject with many eschewing the sector due to poor past experiences (especially since 2008) and others making it a permanent allocation in portfolios. A great paper on the subject of hedge fund performance is called, ‘Size, Age, and the Performance Life Cycle of Hedge Funds’ and was written by Gao, Haight and Yin in 2018. The researchers concluded that smaller funds tend to perform better than their larger counterparts. Larger funds tend to be well known brand names or high-profile managers, which grab a lot of media attention. Choosing a manager based on how well known they are is also referred to as the ‘Masked Man Fallacy’. No, nothing to do with Zoro. The misconception occurs when one does not recognise or identity something under one description, it must be different from something they DO recognise under another description. To simplify: Premise 1 – I know who Bruce Wayne is. Premise 2 – I do not know who Batman is. Conclusion – Bruce Wayne cannot be Batman. In the context of hedge fund selection: Premise 1 - I know successful hedge fund managers generate high returns. Premise 2 – I have never heard of this particular hedge fund manager. Conclusion – This unheard-of fund manager cannot generate high returns. If you have convinced yourself to make an allocation to this space, you should think carefully about selection and look to avoid the trap of high profile managers with big AUM. Sometimes small can be best. What do you think?

A Bloomberg opinion piece which takes the position that hedge funds have reached capacity and can no longer outperform. That may be somewhat true directionally, but the piece misses on a few key things. First, it's true that hedge funds don't like to be compared to the S&P - but they shouldn't be. Investors in hedge funds are often looking for low volatility, downside protection, and low correlation to the markets (not that they always get these things). Secondly, a lot of great managers with outsized returns, and with capacity to spare, are not the large ones which take up the bulk of hedge fund indices on a dollar basis; in fact, they may not contribute their returns to these indices at all. The alternatives industry very much has a CYA approach to allocation, where no one can be blamed for investing into Citadel or Two Sigma, but taking a risk on an emerging manager has career downside. This paragraph is also misleading IMHO: "Hedge funds pivoted, trumpeting a multi-strategy approach where they spread their bets across different assets and portfolio managers. Translation: If one high-priced hedge fund strategy is likely to disappoint, then investors should try owning more of them. It’s almost as comical as when Wall Street banks told investors in the 2000s that buying high-risk mortgage debt would magically become safer and more profitable if investors stuffed more of it into their portfolios. It didn’t work with mortgages, and it isn’t likely to work with hedge fund strategies." Comparing multistrats which include truly uncorrelated strategies to mortgage tranches with the same underlying risks is a bit disingenuous. https://lnkd.in/gHvH5FzU

Biggest multistrategy hedge funds now employ nearly 16,000 people Investment banks may be pruning and shrinking their headcount, but the biggest multistrategy hedge funds are still out there, hiring. Newly filed US regulatory reports for 10 of the biggest funds (Citadel, Millennium, Balyasny Asset Management L.P., Point72, Verition Fund Management LLC, Schonfeld, Walleye Capital, ExodusPoint Capital Management, LP) reveal that the top funds now employ a combined 15,665 people in total, of whom 7,103 are investment staff. In combination, they're like a small investment bank circa 2006. They're still growing. In the past year, Citadel, Millennium, ExodusPoint, Point72 and Balyasny alone have added 1,663 people in total. In the past year, Millennium has added 260 net new investment staff, while Citadel has added 62. Point72 was the second-biggest net new hirer of investment professionals in 2024, with 186 additions. ExodusPoint, which saw $1bn of funds yanked in 2023, still added 32 portfolio managers last year. Balyasny has 13 fewer investment staff than the last time we checked. Multistrategy hedge funds are hedge funds that operate teams across multiple investment strategies with a view to generating alpha in all markets. Capital is allocated from a central pot across different teams (fondly known as pods) and portfolio managers typically get to keep around 20% of their pnl, something which can be very lucrative indeed. On the other hand, though, if their pod makes a loss they typically get "stopped out" and their pod is disbanded, as ex-JPMorgan high yield trader Bhavit Sawjani has recently discovered to his detriment at ExodusPoint. Achieving a job in a multistrategy hedge fund is not at all easy. Balyasny recently revealed that only accepts 0.5% of applicants for its internships. Ken Griffin, CEO of Citadel, said last week that the fund accepted fewer than 1% of applicants last year. #hedgefund #jobs Stewart Tsui

09/04/2024 Rates & Bonds Hedge funds held gains in August market rollercoaster September 4, 20245:31 PM GMT+2Updated 39 min ago LONDON, Sept 4 - Global hedge funds posted positive results in August even as the unwind in popular yen carry trades whipsawed markets, bank research and sources familiar with the funds' performance showed on Wednesday. Hedge funds posted an average positive 1.3% return for the month, according to a prime brokerage research note from JPMorgan on Tuesday and seen by Reuters on Wednesday. Some strategies performed better than others as, early in the month world stocks sank in response to U.S. recession concerns and as a surprise Japanese rate increase wrong-footed currency speculators. Equity markets later rebounded to near-record highs. Multi-strategy hedge funds that house many different kinds of trading desks under one roof averaged 0.1% for the same period, the bank added. Citadel's flagship multi-strategy fund Wellington was up roughly 1% last month, as well as Schonfeld Strategic Advisors' flagship fund Strategic Partners. British hedge fund firm Winton Capital, overseeing $12.3 billion, finished August down roughly 0.2% and 1.8% in its multi-strategy Winton Fund and its Diversified Macro Fund, respectively. The multi-strategy Winton Fund, which uses quantitative trading, is up 8.1% for the year so far, whereas the Diversified Macro fund is up 4% for the same time period. Stock trading hedge funds relying on systematic algorithms to trade returned roughly 2% for the month to Aug. 30, JPMorgan said. The stock trading Eureka Fund of British hedge fund Marshall Wace, co-founded by Paul Marshall, finished down 0.46% for August but was still almost 11% higher since the start of the year, a source with knowledge of the matter told Reuters, asking not to be named. The $68.4 billion hedge fund's Market Neutral Tops fund, meanwhile, returned 1.72% in August, contributing to a 18.53% year-to-date gain. Check the hedge funds' performance here: Page 1continue A man stands next to an electronic stock quotation board inside a building in Tokyo, Japan August 2, 2024. 

I built a hedge fund from 2.8M to 150M during the 2008 financial crisis. It nearly killed me, and I sold my stake not long after, but I learned 3 BIG lessons: First, some background: My co-founder and I graduated in the aftermath of the dot-com bubble in 2003-2004. At the time, a lot of hedge funds were popping up. So we said, “Well, if they can do it, we can, too. And we’ll do it our own way!” The two of us started FiveT Capital in 2006. A hedge fund with a long/short equity strategy with a tech focus. We raised $2.8M from friends and network to get started, and within 2 years, we grew our fund to $150M and 12 employees. When I looked back on my journey, it taught me 3 crucial business lessons I’ll never forget: Lesson 1: Hire people who know more than you Because we dove right in and started without thinking much, we hired interns and junior industry outsiders, none of whom were ever involved in hedge funds or asset management. Instead, we taught ourselves everything we needed to know about running a hedge fund. Then, we turned around and taught everything to our new hires. Our first employee was my co-founder’s neighbor, who learned hospitality management before joining us. It worked, and we quickly turned him into a hedge fund securities operations specialist, but it was intense. And unnecessary. We should have hired more senior people from whom we could learn. __________ Lesson 2: Develop a unified vision quickly Our strategy centered on combining trading with fundamental analysis. Financially, this worked great. Fund returns were strong. But it also meant we had two separate cultures inside our company. One was the traders, who judged everything by what would happen in the next 10 minutes. The other was the analysts, who needed time, space, and quiet to do in-depth research. This led to conflicts we didn’t know how to manage because we had no clear vision and did not build a cultural DNA for the company. __________ Lesson 3: Fix responsibilities upfront My co-founder and I never really discussed the division of responsibilities and the final say on specific topics upfront. Whatever one side didn’t do, the other side picked up. This was incredibly stressful, especially managing a fast-growing team of young people in their late twenties and, being the oldest at 30, heading into the financial crisis. __________ It was a great success - especially for investors, as the fund returned 24.9% p.a. from its inception to my successful exit in 2008. It was a very intense time for us, and we made many mistakes. My former co-founder and FiveT each continue to be incredibly successful. So are we at Stableton. Now, 16 years later, I still benefit from the learnings I made then.

Why the Secrecy in Hedge Funds? 5 Reasons You Need to Know. Working on Wall Street felt like operating out of a vault: -> at the office at 6 AM -> out after dark -> and nobody really knew what I did. Hedge fund managers thrive on low profiles and discretion. Only recently have I started sharing these insights here on LinkedIn. It felt selfish to keep all this knowledge to myself. So, what's behind all this secrecy? 𝟭. 𝗖𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲 𝗘𝗱𝗴𝗲: • Hedge funds employ unique trading strategies  that provide them with a competitive advantage in the markets. 𝟮. 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗥𝗲𝗹𝗮𝘁𝗶𝗼𝗻𝘀: • By keeping strategies and operations confidential - hedge funds can manage investor expectations and maintain a controlled narrative about the fund's performance. 𝟯. 𝗠𝗮𝗿𝗸𝗲𝘁 𝗜𝗺𝗽𝗮𝗰𝘁: • If a hedge fund's trades became public knowledge - it could influence market prices, making it more difficult for the fund to enter or exit positions at favorable prices. 𝟰. 𝗣𝘀𝘆𝗰𝗵𝗼𝗹𝗼𝗴𝗶𝗰𝗮𝗹 𝗜𝗻𝗳𝗹𝘂𝗲𝗻𝗰𝗲: • Operating under a veil of secrecy can enhance the mystique and allure of a hedge fund - making it more attractive to potential investors who equate secrecy with exclusivity and high returns. 𝟱. 𝗟𝗶𝘃𝗶𝗻𝗴 𝗶𝗻 𝗬𝗼𝘂𝗿 𝗛𝗲𝗮𝗱: • Hedge fund analysts often live in their head, absorbed in deep research and analysis. This inward focus can easily be mistaken for secrecy. More of us should start spilling the beans. After all, don’t we all benefit from having better investors? For more stock snippets (snippets, not recommendations!), make sure to follow Tuesday's Finance Column and click the 🔔 under the banner ⬆️. That's also where you can click to subscribe to the “Productivity Boost in 30” newsletter.

Hedge funds have gone through an extended period of market volatility, starting with the global pandemic four years ago and driven further by geopolitical tensions, and interest rate fluctuations. That these funds exist to generate alpha during market turbulence brought them into sharper focus, making their performance journeys over the past few years into a mixed bag. Some have consistently outperformed the market, while others have struggled to stay resilient amidst all this unpredictability. Despite macroeconomic headwinds and geopolitical concerns, 2023 still proved to be a good one for hedge funds. A recovering stock market last year brought additional returns to these funds, though the large ones managed to outdo the rest. Market data suggests that the world’s 20 most successful hedge funds reaped record profits in 2023, creating a combined $67 billion for investors.

Hedge Funds Take Profits as S&P 500 Nears Record: Taking Stock From a today's Taking Stock: As stocks hover near all-time highs, driven by resilient earnings and expectations of a monetary policy easing, hedge funds are taking money off the table in anticipation of a volatile month ahead. US equities led the net selling across global equities last week as hedge funds trimmed their long positions, according to Morgan Stanley’s weekly prime brokerage data as of August 29. That broadening was on display in August when an equal-weight version of the S&P 500 posted five records while the S&P 500 had none. This doesn’t happen often — the last time was in January 2013 — and is the opposite to the more common course of events when Big-Tech gains drive the S&P 500 to new records while the equal-weight index lags behind. But to hedge funds, it’s time to prepare for what could be a volatile month ahead. The mildly bearish stance is based on the combination of short sales being up, net selling of some long positions and increased net buying of macro baskets. “Hedge funds were taking money off the table as they want to keep some dry powder in anticipation of a return of liquidity this week and ahead of the jobs data that could potentially determine whether the Federal Reserve cuts by 25 or 50 basis points,” said Frank Monkam, senior portfolio manager at Antimo. On a sector basis, hedge funds sold eight of the 11 global sectors last week, with one of the most pronounced unwinds across financial stocks, Goldman Sachs Group, Inc.’s prime brokerage data show. Selling comes as financial stocks have rallied to a record high this year, bolstered by optimism for a resilient economy as the Fed nears interest rate cuts “Most mangers have a had a good run in financials, so some are now taking profits in anticipation that imminent interest rate cuts, which may be larger than expected which will weaken the space,” said Jon Caplis, chief executive officer at PivotalPath, a hedge fund research firm.