Hedge Fund News | Hedge Week

Global capital markets technology platform provider Trading Technologies International (TT) has introduced TT Splicer, a new TT Premium Order Type that intends to enhance functionality for synthetic multi-leg spread trading.

In a statement, Joe Signorelli, EVP & Managing Director, Quantitative Trading Solutions, said: “TT Splicer combines the ease and flexibility of TT’s market-leading Autospreader with the power of our best-in-class execution algos to uniquely minimise slippage and optimise trade execution when trading synthetic multi-leg spreads.”

According to a press release, TT Splicer enables users to leverage Autospreader to create a synthetic multi-leg instrument on any exchange – even if the exchange doesn’t list those products – and then utilise one of TT’s built-in algos to seamlessly manage order execution. TT Splicer coordinates leg execution across colocated servers and tracks all fills in real time, while dynamic custom ratios balance risk.

London-based hedge fund manager Nickel Digital Asset Management’s flagship Diversified Alpha Fund has delivered record quarterly and monthly performance, according to the latest data from BarclayHedge.

Data from BarclayHedge shows the fund achieved a net 11% return in the first quarter of 2024, as compared to 0.6% return of the HFRX RV Global Multi-Strategy Index over the same period.

The record quarterly performance was fuelled partly by a record net 5.3% return in March alone, driven by an exceptional mix of volatility, expanding trading volumes and high dispersion across crypto assets traded by Nickel.

The recent record performance comes on the back of last year’s 20.1% annual return. Since launching in February 2021, the fund has now generated a net return of 41%.

Nickel oversees $180m across several funds. Its Diversified Alpha Fund has historical volatility of 8.5% and is designed to generate non-correlated solid returns in constructive environments while protecting capital in challenging markets, according to a press release. The fund runs fully systematic strategies ranging from statistical arbitrage, relative value and funding arbitrage to momentum and mean reversion.

Digital asset investment products saw outflows for the second consecutive week totalling $206m, with trading volumes in ETPs dipping slightly at $18bn, according to the latest Digital Assets Fund Flows Weekly from CoinShares.

Bitcoin saw $192m outflows, but few investors saw this as an opportunity to short, with short-bitcoin seeing $0.3m outflows.

Meanwhile, blockchain equities saw its 11th consecutive week of outflows totalling US$9m as investors continue to worry over the consequences of the halving on mining companies, according to CoinShares.

Aspect Capital, a London-based quant hedge fund with $7.5bn in AUM, has racked up a 21% return so far in 2024 in its flagship fund on the back of winning bets on currency markets and commodities, according to a report by Bloomberg.

The report cites Director of Investment Solutions Razvan Remsing in confirming the fund’s performance, which is ahead of the average 14% return for trend-following funds and 3% for discretionary macro managers over the same period, based on Société Générale’s indexes.

“The majority of our returns are from the dispersion in currencies and commodities,” Remising said.

The firm’s market-following trading models have profited from positioning for a stronger dollar, as markets veer toward Federal Reserve rates staying higher for longer, as well as shorting the Japanese yen and the Swiss franc — two of the year’s worst-performing major currencies against the dollar.

In commodities, Aspect has steadily trimmed a long position in cocoa after it hit record highs, while upping its exposure to gold and oil, which have both seen gains amid ongoing tensions in the Middle East.

High Ground Investment Management, a London-based hedge fund run by Edgar Allen, has appointed former Adelphi Capital Partner Henry Guest to run its second hedge fund, which is due to launch in Q4 2024, according to a report by Bloomberg.

The report cites High Ground in confirming that Guest joined the firm last week and will focus on a concentrated portfolio of growth companies in the healthcare and technology sectors in Europe. The new fund will operate alongside the firm’s value-biased hedge fund, which Allen launched in 2019.

High Ground now manages around $625m, having launched with just $10m five years ago.

Mountaineer Partners Management, an opportunistic hedge fund focused on value and event-driven investments, has written an open letter to Vishay Intertechnology’s board of directors, urging the implementation of $600m share buy-back programme.

Montaineer which owns over 2m shares of Vishay’s common stock, equating to 1/7% of the company, says the electronic components maker has an “irrationally low valuation” and should use excess cash on its balance sheet to repurchase stocks and boost shareholder value.

In the letter, Montaineer wrote: “The board should approve and implement a $600m accelerated repurchase. Vishay has more than $800m of cash and equivalents. Moreover, the company’s total liquidity is over $1.5bn, which represents more than 50% of the company’s current market capitalisation.

“Our research indicates that should the company combine a $600m accelerated share repurchase with the $725m of repurchases through 2028 indicated in the Investor Day plan, Vishay could repurchase 45% of shares outstanding at current prices.”

This data-led report provides an update on the rebounding hedge fund launch market. With 2024 set to be a historic year for new hedge fund launches, as an unprecedented number of well-pedigreed managers starting up, Hedgeweek selects the Top 20 prospects and analyses the wider environment facing new hedge funds – from ops to fundraising, strategy considerations to performance. Get all the intel, plus insights from the sector’s leading firms, in this exclusive Hedgeweek special report, sponsored by Marex.

The first sharp dip in US and European stocks this year prompted global hedge funds to up their borrowing to the highest level seen in five years in the week ending 19 April, according to a report by Reuters.

The report cites a Goldman Sachs note seen by Reuters as highlighting the increase in leverage provided by banks to fund hedge fund investments. While such loans can help managers amplify returns, they can also increase losses.

According to Goldman Sachs’s note, hedge fund gross leverage, or total borrowing, reached 270% after rising 2.6 points from the prior week, while overall net leverage, which measures a fund’s total assets including borrowing against what it actually owns, increased by 0.5 points to 73% last week.

The increase in leverage was seen among stock-picking hedge funds that employ human traders to make investments rather systematic funds that employ computer algorithms, according to Goldman Sachs, with managers buying equities in the US and Europe after three weeks straight of selling.

The S&P 500 fell more than 5% last week from its 28 March closing high, its biggest retreat since October, while the broadest European index of stocks saw its biggest weekly decline since mid-January losing, falling 1.2%.

Global hedge fund industry assets increased for the sixth successive quarter in Q1 2024, hitting a record $4.3tn on the back of strong performance and investor inflows, according to the latest figures from industry data provider HFR.

Total hedge fund assets rose by nearly $190bn over the quarter as investors increased exposure to directional equity hedge, event-driven and uncorrelated macro strategies.

The HFRI Fund Weighted Composite Index advanced 4.5% in Q1 2024, led by directional equity hedge and event-driven strategies, with gains driven by exposure to technology/AI, as well as acceleration in M&A. Larger funds produced higher relative performance, with the HFRI Asset Weighted Composite gaining 5.12% for the quarter. The HFR Cryptocurrency Index returned 47.9% in Q1, bringing the trailing six-month return to 106.9%.

Capital managed by equity hedge (EH) strategies surged by nearly $70bn to begin 2024, rising to a record level of $1.25tn, driven by performance-based gains, as well as estimated net asset inflows of $8.5bn. EH sub-strategy asset increases were led by Fundamental Value funds in Q1, which increased by an estimated $37bn for the quarter, bringing total EH: Fundamental Value capital to an estimated $706.8bn. The HFRI Equity Hedge (Total) Index posted a strong gain 5.2 in Q1 after leading all strategy indices for 2023 with a gain of 11.4%.

Event-driven (ED) strategies, which categorically focus on out of favour, often heavily shorted, deep value equity and credit positions, experienced an estimated asset increase of nearly $49bn in Q1, raising total ED capital to a record $1.21tn, inclusive of estimated net investor inflows of $8bn for the quarter. ED sub-strategy asset increases were once again concentrated in higher beta special situations and shareholder activist strategies, with these increasing by $17bn and $13.4bn respectively in Q1 2024. The HFRI Event-Driven (Total) Index gained 2.5% in Q1 2024 with higher performance from larger managers as the HFRI Event Driven (Asset Weighted) Index advanced 3.9%, led by the HFRI ED: Activist Index, which surged 6.1%.

Uncorrelated macro strategies posted their second-strongest quarterly performance since 2003, with the HFRI Macro (Total) Index surging 6.2% in Q1 2024, trailing only the 6.7% gain in Q1 2022 over the last 20-plus years. Larger macro funds delivered stronger relative performance in Q1, as the HFRI Macro (Total) Index – Asset Weighted jumped 7.15%, led by systematic macro strategies and complemented by fundamental strategies. Total macro capital increased by an estimated $44.8bn in Q1, inclusive of net asset inflows of $1.7bn for the quarter, increasing total macro strategy capital to $715bn. Macro sub-strategy asset increases were led by quantitative, trend-following systematic diversified CTA strategies, which added an estimated $28.1bn in Q1. Macro sub-strategy performance was led by the fundamental HFRI Macro: Systematic Diversified Index, which surged 9.4% in Q1, while the HFRI Trend Following Index jumped 8.1% for the quarter.

Hedge fund capital managed by credit- and interest rate-sensitive fixed income-based relative value arbitrage (RVA) strategies also increased in Q1 as managers positioned for continued inflationary pressures and elevated interest rates, with RVA capital increasing by an estimated $25.8bn in Q1, raising total RV capital to an estimated $1.13tn. Multi-strategy funds led RVA asset increases in Q1 2024, adding an estimated $17.2bn of capital to end the quarter at $692bn. The HFRI Relative Value (Total) Index gained 2.5% in Q1 2024 with sub-strategy performance led by the HFRI RV: Convertible Arbitrage Index, which advanced 4.0%.

Investor capital inflows in Q1 2024 were heavily concentrated in the industry’s largest firms, with firms managing greater than $5bn experiencing an estimated net inflow of $14.4bn. Mid-sized firms managing between $1 and $5bn experienced a smaller inflow of $1.67bn, while firms managing less than $1bn experienced an estimated inflow of $ 0.5bn.

In a press statement, Kenneth J Heinz, President of HFR, said: “Total hedge fund capital accelerated the year end surge in the first quarter to surpass the $4.3tn milestone, as managers focused on unprecedented risks and opportunities dominating allocations into mid-year 2024, with the most significant of these being geopolitical/military conflict, but also including ongoing volatile inflation, interest rates and macroeconomic considerations which have dominated the past two years.

“At the same time, managers are also accessing exciting, volatile, and rich opportunity sets in AI, technology, cryptocurrency and M&A, positioning portfolios to access these.”

Alberto Gallo, CIO of $200m hedge fund Andromeda Capital Management, is betting that the ECB will cut interest rates just once or twice this year by selling European government bonds, according to a report by Bloomberg.

Gallo, who previously made correct calls on inflation and the Federal Reserve’s rate hikes, believes that the market has overestimated the number of interest rate cuts the ECB will make, and says that Europe is unlikely to enter a recession when governments in the region are spending more, US growth remains robust and China continues to stimulate its economy.

Gallo, who left Algebris Investments in 2022 to help set up Andromeda, believes that German bond yields are too low for such an environment, with 10-year rates likely to rise from 2.75% to 3% this year from about 2.5% now, he said. Gallo sees 10-year US Treasury yields rising to 5% and expects no rate cut from the Federal Reserve this year.

The report quotes Gallo in an interview: “It’s hard to see the ECB cutting as much as the market is pricing. The European economy might not be growing as fast as the US, but it’s not collapsing. Buying German bunds at current yield levels won’t give you any protection against inflation.”

Andromeda’s flagship credit long-short strategy, which focuses on relative value across bonds and credit while minimising potential volatility, had a net gain of 8% in 2023.

Rokos Capital Management and Bridgewater Associates were among several big hedge funds to up their holdings in shares on Nvidia at the end of last year, positioning themselves to benefit from the stock’s almost 50% gain so far in 2024, according to a report by Reuters.

The report cites securities filings as revealing that at the end of December, Rokos bought more than 254,000 shares worth $126m in the chipmaker, which has benefitted from a surge in investor interest in AI-related stocks.

Meanwhile, Bridgewater, the hedge fund founded by Ray Dalio, increased its stake in Nvidia by 458% to more than 268,000 shares, with the firm’s positions being worth $133m at the end of December.

Arrowstreet Capital also upped its Nvidia holding, with the acquisition of an additional 3.9m shares, taking its position to $2.1bn.

Other funds sold or reduced their Nvidia stakes, with Greg Poole’s Echo Street Capital Management divesting its entire holding of 355,000 shares, D1 Capital Partners closing out its position with the sale of nearly 147,000 shares and Discovery Capital Management selling about 119,000 shares, which had accounted for 9.2% of its portfolio.

British hedge fund trader Anthony Mark Peterson will admit to his part in a scheme that defrauded the Danish tax authorities of more than DKK9bn ($1.2bn) when his case is heard in court later this month, according to a report by Reuters.

The report quotes Patterson’s lawyer, Henrik Stagetorn as saying: “There will be a court hearing in February where he plans to confess.”

Patterson, who had initially denied any wrongdoing, has been charged with participating in an attempted fraud over an additional DKK500m.

The case stems from a Danish investigation into so-called “cum-ex” trading by London-based hedge fund Solo Capital Partners with the firm’s Founder and the main suspect in the case, Briton Sanjay Shah, currently in detention in Denmark, having been extradited from Dubai in December. Shah denies the charges against him.

Another Briton, Guenther Klar, was jailed for six years by a Danish court for defrauding tax authorities of more than DKK320m crowns as part of the same scheme, but has also denied wrongdoing and is appealing against his verdict.

Following a year of record losses, Element Capital Management, the global macro hedge fund firm founded by Jeffrey Talpins is planning to downsize its operation in terms of external investments and run mainly in-house capital, according to a report by Bloomberg.

The report cites a unnamed person with knowledge of the matter as revealing that the firm the New York-based firm informed clients on Wednesday that it intends to return an undisclosed sum to investors and focus on generating higher returns while managing fewer assets.

According to Bloomberg’s source, the firm is also planning to reduce the firm’s roster of external investors as part of the plan for internal cash to account for the majority of its assets.

Element, which has been closed to new money since 2018, lost about 10% last year on the back of losses in the previous two years and has seen assets sink to about $8.5bn from a peak of $18bn. The fund reportedly gained 5.3% in January.

PARTNER CONTENT

By Michael Brice
President, BW Cyber, LLC 

 

 

Almost two years ago the Securities and Exchange Commission (SEC) announced its plans for enhanced cybersecurity regulation of registered investment advisers (RIAs) and funds. Since that time the SEC has released similar rules for publicly traded companies (I’ve already written about this here). When the new cyber rules for RIAs and funds become final, I suspect the SEC will be quite swift in making public examples of managers who fall victim to cybercrime. In a worst-case scenario, I fully expect we’ll see a classic double-whammy in which ‘the beatings will continue until morale improves’.

If regulations are the ‘stick’, we need some ‘carrots’ from our regulators. I’d like to see some parity with the newly emerging cyber regulations which also provide critically needed support to help victims recover from a cyber-attack. 

I’m not talking about the creation or expansion of a cyber government organization – we already have CISA (Cybersecurity & Infrastructure Security Agency). I’m referring to the predominant cyber financial threat affecting RIAs, private equity firms and PE portfolio companies nationwide: wire fraud. 

Wire fraud is far more widespread than most people realize. Why? because it’s a big fat red flag to your investors.  Ergo – nobody talks about it publicly. So let me explain briefly what a wire fraud looks like and what you can expect:

• You find out you were tricked into sending a wire (usually in the hundreds of thousands of dollars but often in the millions of dollars). The realization is sickening.  
• You don’t know who to call or what to do, but most people start with their bank. Good luck.
• You may be lucky and have a bank fraud unit that helps you to get your money back; or you might not. There’s no legal requirement for them to help you because, guess what – it wasn’t their fault.
• So maybe you call the Sherriff, or Secret Service, or Treasury, or the FBI. (Spoiler alert, the proper step to take once you realize you are a victim of wire fraud – after you notify your bank – is to submit a fraud report to the FBI via the http://www.ic3.gov/ website). 
• Now guess what – nobody updates you on the status of your loss. Nobody. This goes on for months. You just hope that the bank is doing what they can and that your IC3 report is being investigated by the FBI. 
• Now for the kicker – there’s no single government agency federally funded or mandated to report to Congress with the primary goal to defend and protect Americans against wire fraud. 
• As best I can tell, the FBI does what they do because they care – not because Congress has made it a regulatory requirement. And you know who else cares – Treasury, the Secret Service, and your local Sherriff. And yes, I suspect even your bank…
• But without an agency with a federally funded legal mandate, and a stated mission to be the ultimate agency to oversee and respond to wire fraud, answer your calls, provide a wire fraud ticket, ensure your bank is actively working to get your money back, keep you updated on your case, and to ultimately take responsibility for reporting to Congress, you’re left hoping that somebody at the bank or at the FBI or somewhere else will elevate your case above the other 3.2 million (and growing) cyber fraud cases totaling over $27.6B in losses that have been reported to the FBI since 2018.

So how does this end if you are the victim of a wire fraud? Sadly, unless you identify the fraud quickly (generally within three business days), the odds of getting all your money back are not in your favor. And if you’re an RIA or fund, based on the new regulations, it’s possibly going to result in an SEC regulatory enforcement action against you and your organization:  A big fat red flag event. 

While the proposed 2024 SEC cyber regulations are long overdue when compared to the rules put out by FINRA and the NFA years ago, we also desperately need Congress to provide a single federal organization with a legal mandate to ‘own’ wire fraud and to help businesses and citizens deal with the aftermath. 

 

 

Michael Brice, Founder, BW Cyber, LLC – Michael is the Founder and President of BW Cyber, LLC, a veteran owned/veteran friendly cybersecurity consulting firm that provides SEC cyber compliance and related cybersecurity technology solutions to the wealth and asset manager verticals. In addition to his military experience as a US Marine Corps officer, Michael has over 35 years experience providing technology, security, and related cybersecurity consulting solutions in the financial services industry. Michael is also the Executive Liaison between BW Cyber, LLC and the FBI for all forensic investigations related to wire fraud investigated by his firm. In this role, he often collaborates with the FBI to provide community outreach to help wealth and asset managers better understand the nature of cybersecurity and the devastating impacts that criminals around the world are causing with their ongoing wire fraud attacks. Michael is a graduate of Clemson university where he obtained a BS in Computer Information Systems. 

An electricity failure and subsequent shutdown of a BP refinery in the US sparked an oil sell-off as hedge funds and other money managers sold the equivalent of 86m barrels in the six most important petroleum-related futures and options contracts over the past week, according to a report by Reuters.

The refinery in Whiting, Indiana — the largest in the US Midwest and BP’s largest globally — first opened in 1889 as part of John D Rockefeller’s Standard Oil Company and now produces 7% of all asphalt in the US, according to the oil company’s website, processing over 400,000 barrels daily. Its unexpected shutdown — which is expected to last up to three weeks, according to another report from Reuters — was caused by site-wide electricity failure at the start of the month.

As a result, surplus crude is likely to accumulate across the region — particularly around the NYMEX delivery point in Cushing, Oklahoma — according to the report. This contrasts with investors’ bullish bets since mid-January on depleting inventories in Cushing and a subsequent squeeze on deliverable supplies. Now, production shutdown has delayed further depletion and sent prices sliding.

The report notes that this is the third time since mid-2023 that fund managers have tried to build a bullish position, only to be forced to retreat as inventories remained above average. Now, bullish long positions outnumber bearish shorts by a ratio of 2.24:1 from 1.02:1 eight weeks earlier.

The report also attributes heavy sales of NYMEX, ICE WTI (-62m barrels, at the fastest rate since last October) and Brent (-23m) to fund managers expecting a significant increase in the amount of crude available. The combined position in WTI fell to a three-week low of 55m barrels, down from 117m barrels the previous week.

Despite the sell-off of US diesel (-7m) and gasoline (-11m), fund managers bought up European gas oil to the tune of 17m barrels, reflecting beliefs that Europe’s industrial recession is coming to an end, as are trade disruptions brought on by the Red Sea crisis.

Meanwhile, the net long position in gasoil futures and options increased to 50m barrels from 1m on 12 December 2023. Despite the disruption of fuel production brought on by the Whiting refinery, investors eschewed US gasoline and diesel futures in favour of realising profits on previous bullish long positions, after a period of bullish bets on the outlook for US fuels.

Elsewhere, hedge funds and other money managers sold the equivalent of 401bn cu ft in two major futures and options contracts linked to the price of gas at Henry Hub, a distribution hub on the natural gas pipeline system in Erath, Louisiana.

On the heels of topping the Americas large-cap list for most shorted stock of 2023, Tesla was the most crowded security in January, with a score of 99, according to the latest Shortside Crowdedness Report from Hazeltree.

The report is a monthly listing of the top 10 shorted securities in the Americas, EMEA, and APAC regions in the large-, mid-, and small-cap ranges.

In a statement, Tim Smith, Managing Director of Data Insights at Hazeltree, said: “2024 has started the way 2023 ended, with similar concentration of interest in many of the same securities and sectors, with the exception of the APAC region where there appears to be more movement among the top shorted securities.”

Energy companies Chevron (94) and Exxon Mobil (84) closely followed Tesla in the Americas large-cap rankings, alongside Apple (84) and Charter Communications (84). Albemarle Corporation had the highest institutional supply utilisation (23.59%)

In the mid-cap category, semiconductor developer Wolfspeed was the most crowded security (99), while Bloom Energy Corp had the highest institutional supply utilisation (69.14%).

In the small-cap category, solar energy company Sunnova Energy remained the most crowded security (99), while battery manufacturing company Enovix displayed the highest institutional supply utilisation (86.52%).

In the EMEA large-cap category, luxury goods conglomerate LVMH was the most crowded security for the fifth consecutive month (99), and Universal Music Group had the highest institutional supply utilisation (5.99%), while in the mid-cap category, French rail manufacturer Alstom was the most crowded security (99) and had the highest institutional supply utilisation (80.75%).

Irish video game company Keywords Studio (99) was the most crowded security in the EMEA small-cap category for the second consecutive month, while health & fitness club Basic Fit had the highest institutional supply utilisation (77.56%).

In the APAC large-cap category, Takeda Pharmaceutical was the most crowded security (99), with Aeon leading in institutional supply utilisation (21.22%), while computer manufacturing company Daifuku was the most crowded security (99) in the mid-cap category and IHI stood out with the highest institutional supply utilisation (33.46%).
In the APAC small-cap category, Webjet was the most crowded security (99), while Takara Holdings had the highest institutional supply utilisation (26.31%).

The data contained in the report comes from Hazeltree’s proprietary securities finance platform data, which tracks approximately 15,000 global equities across the Americas, EMEA, and APAC. The data is aggregated and anonymised from the contributing Hazeltree community, which includes approximately 700 asset manager funds.

Genesis Global, a software provider geared towards financial markets organisations, has launched a web version of its multi-asset class middle-office solution, Trade Allocation Manager (TAM).  

According to a press release, the web version of TAM is a scalable, cloud-native solution that integrates with other web services, reduces deployment costs and improves updates and maintenance cycles. TAM, which was introduced in 2018 and is built on the Genesis Application Development Platform, acts as a centralised application that automates trade matching, allocation, confirmation and other middle-office processes for equities and fixed-income products. The solution can be hosted, deployed on premises or via cloud.

In a statement, Niketta Postlethwaite-Williams, Senior Product Manager at Genesis Global, said: “The steady stream of innovation in the Genesis platform delivers an expanding array of functional and business componentry, AI-driven services and UI tools from which we draw to make TAM a modern and adaptable middle-office solution. With the web version, clients benefit immediately from the capabilities we add to TAM.”

She added: “Bringing all asset classes, markets and regions into a centralized middle-office solution is one of the most important things a firm can do to improve operational efficiency and enhance its compliance posture.
“Having a single, unified middle office also positions financial firms to benchmark their post trade processes. TAM provides extensive metrics for performance analytics.”

Luis Stuhlberger, the CEO and CIO of Verde Asset Management, a Sao Paolo-based hedge fund managing BRL24bn ($4.8bn) and one of the country’s largest independent asset managers, is looking to China’s smaller companies after the selloff in China’s equity market at the start of 2024, according to a report by Bloomberg citing an investor note. 

The note reveals that Stuhlberger’s flagship fund built a long position — via options — on an unnamed Chinese small-cap index. Both wager size and the index name were not disclosed.

In the note, the hedge fund described the move as a “small, opportunistic position” in light of Chinese stocks having a “horrendous” January and helping to send other assets lower, including Brazil’s benchmark Ibovespa index.

Since its founding in 1997, Verde’s flagship fund is up over 24,300% in terms of local currency after fees, and has seen almost double the annual return of the Ibovespa index. Last month, however, the fund fell 0.28% after fees, underperforming the 0.97% gain for the CDI rate — the benchmark for local hedge funds.

Chinese small-caps have struggled in 2024 due to growing concerns about the country’s economy and despite their popularity with Chinese retail and institutional investors last year. The CSI 1000 Index fell 15% this year and has underperformed blue-chip benchmarks, reflecting investors’ bets that measures to revive the market will prioritise larger firms. According to the report, structured derivatives and quantitative funds are seen to have amplified the recent selloff.

Like Stuhlberger, more investors are using options to capture potential upside in Chinese shares, according to the report. This shift can be seen in exchange-traded products, which track Chinese stocks and have just recorded a spike in option volume as traders prepare for a bounce in battered shares. Bank of America and EPFR data cited in the report also revealed that Chinese stocks just recorded their biggest weekly inflow on record, partly driven by state-backed investors.

Soaring energy supplies coupled with subdued demand means that a further slump in EU carbon permits is on the cards, according to a report by Bloomberg citing veteran hedge fund manager Per Lekander, CEO of Clean Energy Transition.

The report quotes Lekander as saying in a telephone interview that the price of carbon permits is “going way lower”.

“The fundamental demand of carbon in the near term is going to be extremely weak,” he said.

Prices have already dropped by 30% so far this year with increases in supplies of renewable power, falling gas prices and a recovery in nuclear and hydro plants combining to curb pollution — a key driver of demand for emission permits in Europe.

European industrial companies purchase carbon permits to account for each ton of emissions they release into the atmosphere. An acceleration in the development of solar energy plants — sparked by Europe’s recent energy crisis — has seen prices plummet from previously soaring levels.

Combined with an increase in the supply of permits available at auction, Lekander is predicting carbon could slump as low as €35. On Wednesday, benchmark carbon futures for December fell to €55.41 a ton, the lowest level seen since March 2022.

Goldman Sachs & Co has achieved a greater than 99% same day affirmation rate and a significant improvement in settlement rates for transactions leveraging the Depository Trust & Clearing Corporation’s CTM’s Match to Instruct (M2i) workflow in Q4 2023.

In addition, Goldman Sachs was able to achieve a 38% reduction in same-day affirmation exceptions and a 64% reduction in US settlement fails by value, when matching and affirming trades with investment manager counterparties who also use CTM’s M2i.

CTM’s M2i workflow aims to significantly increase same day affirmation (SDA) rates on DTC-eligible securities when a trade match occurs between an investment manager and executing broker. DTCC says that clients utilising CTM’s M2i workflow benefit from central matching and auto-affirmation capabilities that are typically more efficient than local matching and affirmation by custodians.

Today, most CTM investment managers leveraging M2i to match and affirm their US trades achieve a near 100% affirmation rate by 9:00pm ET on trade date, achieving the level of straight through processing necessary to meet their counterparties’ T+1 SDA requirements and cut-off times.

As the financial services industry prepares for the upcoming US move to T+1 settlement on 28 May, 2024, firms are looking closely at their post-trade processes to increase automation and to remove inefficiency. Goldman Sachs & Co, a self-clearing broker dealer, implemented CTM’s M2i workflow in Q4 2022 as part of their broader strategy to improve settlement efficiency and create a streamlined post trade experience for clients. They performed an impact analysis across the investment managers leveraging the M2i workflow and observed an increase in same-day affirmations.

CTM, part of DTCC’s ITP suite of products, is a central matching service for cross-border and domestic transactions across multiple asset classes that has become a global best practice.