Hedgeweek Features

Aaron Weiner, a Managing Director at Coatue Management, the $40bn hedge fund founded by Philippe Laffont, will leave the firm at the end of the year to start his own hedge fund, according to a report by Bloomberg citing people with knowledge of the matter. 

Coatue has already notified its investors of Weiner’s pending departure.

Weiner is still based at the firm’s New York office, where he leads healthcare and tactical solutions and has worked on investments in companies including Reify Health, Infinitus Systems, Cadence Solutions, DNA Script and Entos.

Prior to joining Coatue in 2021, Weiner worked at Blackstone and The Goldman Sachs Group.

Pershing Square Founder Bill Ackman is set to launch a new US investment portfolio that will offer retail investors access to an investment strategy that mimics his existing hedge fund but with lower fees and faster access to capital, according to a report by Reuters.

The report cites a regulatory filing as revealing that Pershing Square USA will be listed on the New York Stock Exchange and available to anyone who can invest in the US, including pension funds, endowments and retail investors who are normally excluded from hedge funds.

There will be no minimum investment for the new fund, which will charge a flat fee of 2% every year after the first year, far lower than the 15% to 30% performance fees charged by many hedge funds.

Ackman could potentially tap his 1.2m followers on social media platform X for capital for the fund which will also allow investors to withdraw their cash more quickly than typical hedge funds. Easier access to capital is likely to appeal to state pension funds and other institutions as well as retail investors.

The new, which will be structured as a closed-end fund that raises money through an initial public offering, with its shares then trading on the exchange, will be managed by Ackman, Ryan Israel, the firm’s CIO, and other members of the Pershing Square investment team.

LiquidityBook, a provider of cloud-native buy- and sell-side trading solutions to hedge funds and other sophisticated clients, has appointed trading technology industry veteran Jason Morris as its new President.

Morris previously spent nearly eight years at Enfusion, where he served as the Global Head of Corporate Development, and before that, as President, with responsibility for overseeing the company’s sales, marketing, product, operations, finance and HR departments.

More recently, Morris served as Head of Operations & Payments at PlateIQ (now Ottimate), where he helped grow payments revenue.

Under Morris’ leadership, LiquidityBook plans to expand its reach into new markets and deepen relationships with key partners, while continuing to enhance its product offerings across all areas of its portfolio, order and execution management system and embedded FIX network.

The US Securities and Exchange Commission (SEC) is facing a legal challenge to its latest set of rules, which require hedge funds and private equity firms to detail quarterly fees and expenses to investors, according to a report by Bloomberg.

A lawsuit was filed a week after the rules’ adoption by industry groups, who are represented by former Secretary of Labor Eugene Scalia and include the American Investment Council, which argued that the rules would “fundamentally change the way private funds are regulated in America”.

The SEC’s response in court filings invoked the 2010 Dodd-Frank Act, which was enacted to restructure the financial regulatory system in the wake of the financial crisis, and described the rules as “a flexible and measured approach to resolve problems affecting investors and their stakeholders”.

Another set of rules adopted by the regulator — which is currently chaired by former Goldman Sachs veteran Gary Gensler — last August prohibits firms from allowing certain investors to cash out more easily than others.

The report described Gensler’s tenure as being characterised by a tightened grip on private funds and a desire for greater transparency in an industry known for opaque and complex layers of fees.

The court has not yet ruled on the case — in full, National Association of Fund Managers v. Securities and Exchange Commission, 23-60471, US Fifth Circuit Court of Appeals (New Orleans) — nor has the date been indicated.

This follows the SEC’s recent postponement of another set of rules which would introduce a requirement for hedge funds and proprietary trading firms to register as dealers.

LMAX Exchange, an institutional exchange for global FX, has connected with the Libre Liquidity Bridge (Libre) service from 4OTC, a provider of low latency connectivity services for digital assets and FX.

Libre will enable liquidity providers to stream FX liquidity on LMAX Exchange venues with ultra-low latency.

The service will also provide connectivity to LMAX Exchange execution venues globally, including London (LD4), New York (NY4), Singapore (SG1) and Tokyo (TY3). This enables the company to streamline connectivity management, attract more liquidity onto the exchange, and minimise the time taken to onboard new liquidity providers.

Activist investor Blackwells Capital (Blackwells), a shareholder of The Walt Disney Company (Disney), has reaffirmed its support for the entertainment giant’s current CEO Bob Iger in a proxy statement filed with the US Securities and Exchange Commission (SEC).

In connection with its nomination of Jessica Schell, Craig Hatkoff and Leah Solivan for election to Disney’s board of directors at the company’s annual shareholder meeting, Blackwells has also released an open letter to “fellow shareholders”.

In a press statement, Jason Aintabi, Chief Investment Officer of Blackwells, endorsed his firm’s candidates while questioning the suitability of a rival slate of nominees from Trian Asset Management.

“Jessica Schell, Craig Hatkoff and Leah Solivan bring invaluable expertise and experience to Disney’s board as it faces the challenges and opportunities of a generational transformation,” he said. “Voting for Blackwells’ nominees will ensure the Board has the support it requires across critical areas: media and content, real estate and asset optimisation.”

Aintabi went on to describe the Trian nominees, including the firm’s Founder Nelson Peltz, as “uninspiring”.

In the open letter, Blackwell’s wrote: “If elected, our three nominees for the board have pledged to continue to support Disney’s transformation efforts under the leadership of the current board and CEO, Robert A Iger. In addition to an approach of constructive collaboration, our three nominees will bring unique skills, expertise and perspectives to the board that draw on a range of experiences that the future of Disney depends on.”

Equity long-short hedge funds have seen nearly $150bn in client withdrawals over the past five years as investors have lost faith in their ability to capitalise on bull markets and protect cash during market downturns, according to a report by the Financial Times.

The report cites data from Nasdaq eVestment as showing that the strategy, one of the oldest and best known in the industry, has underperformed the US stock market in nine out of the past 10 years.

Designed to ‘hedge’ against overall market fluctuations through a combination of bets on both winning and losing stocks, past star stockpickers in the long-short space include some of the biggest names in the business including Tiger Management’s Julian Robertson, GLG’s Pierre Lagrange and Egerton’s John Armitage.

More recently though, big names including Chase Coleman at once-high flying Tiger Global and Lee Ainslie at Maverick Capital, have struggled while cheap index tracker funds have reaped huge gains from the bull market.

Despite a sharp rise in interest rates over the past two years long-short funds have continued to struggle gaining just 6.1 per cent on average last year, compared with the S&P 500’s 26.3 per cent gain.

Alternative asset, equity and fixed income fund managers have identified private equity, renewable energy and hedge funds as the alternative asset classes most likely to increased inflows in 2024, according to new research by fund management solutions specialist Carne Group.

Private equity was the top choice of asset managers when asked to identify alternative asset classes expected to see the biggest increase in fundraising this year. Just under a third (28%) of fund managers expected PE’s increase to be ‘dramatic’ when compared to 2023, while 50% anticipated a slight rise. Renewable energy meanwhile polled 30% and 31%, followed by hedge funds (27% and 29%).

Almost three-quarters (73%) of 200 fund managers surveyed across the UK, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland and Denmark, and collectively managing $1.577tn, expect the number of new funds launching within their own sector in 2024 to be higher than the previous year.

Despite waves of market volatility, 14% of fund managers pinpointed a dramatic increase in the number of fund launches this year. Similarly, two-thirds (62%) of fund managers anticipate the number of segregated accounts launched in 2024 to be higher than the previous year, with 14% expecting the total number to be significantly higher.

The majority (83%) of those surveyed also expect an increase in the flow of new capital into their funds and segregated accounts this year, with 8% eyeing significant growth.

John Donohoe, CEO at Carne Group, said: “Alternative asset classes have benefited greatly from recent stock market volatility, which has resulted in a desire for investors to diversify their portfolios more.

“Respondents noted that fund managers face a complex regulatory environment with an increasing focus on corporate governance, issues around reporting, fees and expenses as well as operational costs. This means they need to place an even greater focus on improving their levels of efficiency, whilst maintaining the highest levels of transparency and reporting for investors.”

Finally, just under a quarter (23%) of fund managers anticipated a dramatic increase in the use of third-party providers between 2024 and 2026, while 56% expected a slight rise. This shift to incorporating external expertise is attributed to the ability to launch different product sets, speed to market, and the assurance of stronger fiduciary management of the fund.

Donohoe added: “Our survey shows that the expertise of the investment team is the key selling point for asset managers. As complexity and cost pressures mount, managers will focus their efforts on investment management and distribution, and work with third-party providers to enable them to remain lean, agile and competitive.”

Vision One Management Partners, an activist hedge fund firm co-founded by former Canadian Prime Minister Stephen Harper and Carl Icahn protégé Courtney Mather, wants US department store operator Kohl’s to put itself up for sale, according to a report by Reuters.

The report cites unnamed people familiar with the matter as revealing that Vision One has expressed its concerns about the company’s future to management, having built a stake in the business.

As well as asking Kohl’s to launch a sale process, the hedge fund also wants board representation, according to Reuters’s sources.

Shares of Kohl’s, which operates more than 1,100 stores across the US and also has a retail partnership with LVMH’s beauty products retailer Sephora, ended trading on Tuesday in New York up 4.9% at $26.80 on the news, giving the company a market value of $3bn.

Amid dizzying wrong-way bets and paltry gains for those with an eye on China and Asia more broadly, funds Sino Vision, Ubiquant, Toroa Management and Long Corridor Asset Management all saw gains exceeding 25% in 2023, according to a report by Bloomberg. 

Their performances last year contrast starkly with a simultaneous 13% decline on the MSCI China Index of equities, as well as underscoring how some funds have delivered for investors despite increasing pressure facing once-dominant China-focused portfolios and Asia funds that capitalised on the world’s second-largest economy.

Sino Vision’s Greater China Market Neutral Fund put up 31.9%, propelled by AI-related bets in Taiwan, but has since lowered its gross exposure to China and Hong Kong since peaking in Q1 of 2022, according to a spokesperson cited in the report, due to fewer attractive opportunities.

Toroa Management’s Master Fund saw a 27.5% return, having relegated China to just one-sixth of its overall exposure as well as pivoting to industries such as advanced manufacturing, energy transition, electrification, automation and software primarily in South Korea and Japan — its biggest return drivers last year. When the $200m firm began trading in Q3 of 2021, its exposure to China was more than 50%. Toroa has also held short positions in suppliers of infant formula and liquor to China as well as real estate investment trusts in Japan.

Long Corridor Asset Management’s Alpha Opportunities Fund gained 26.7%, when about three quarters of its profit drew from trading in Greater China, which include the acquisition of Hong Kong-listed shares of PetroChina and Cnooc. In 2021, the latter was added to a sanction list by the Trump administration, causing international investors to dump their shares. Long Corridor subsequently began to buy Cnooc shares in 2022.

Their boons closely follow the shuttering of Chua Soon Hock’s Asia Genesis Macro Fund just last month, which saw a loss of nearly 19% due to a wrong-way bet that Japanese stocks would underperform Hong Kong and China peers in 2024.

Kirkoswald Asset Management, the London-based investment firm founded by Australian Greg Coffey, has become the latest hedge fund to establish a presence in Abu Dhabi with the opening of a new office in the emirate, according to a report by Bloomberg.

The report cites official records as showing that Kirkoswald established an entity within Abu Dhabi Global Market, the city-state’s international financial centre, late last month, with Matthew Press, Francois Lagrange and David Hassan listed as the company’s directors.

Coffey, who rose to prominence as one of the best performing traders at GLG Partners before setting up his own firm in 2018, joins a growing list of hedge funds operating in Abu Dhabi and neighbouring Dubai including Ray Dalio’s Bridgewater Associates, Izzy Englander’s Millennium Management, and Michael Gelband’s ExodusPoint Capital Management.

A number of buy-side firms including hedge funds, asset managers, and insurance companies are adopting solutions from FIS that are historically aimed at sell-side clients, such as its Cleared Derivatives and Cross-Asset Trading and Risk platforms.

In a press statement, the company said that as buy-side clients face pressures to find new revenue streams, reduce risk, drive operational efficiency, and deliver new value for their customers, it is giving these firms new capabilities via its sell-side solutions.

Historically used by clearing members, FIS’s Cleared Derivatives platform has seen new adoption by hedge funds and other buy-side firms in order to access trading venues and clearing houses directly, in turn helping reduce their counterparty risk and freeing up capital.

Similarly, FIS’s Cross-Asset Trading and Risk platform, which traditionally features sell-side capabilities, is expected to improve asset diversification for buy-side firms as well as scale up new strategies for revenue growth. Buy-side clients have been using the platform for features including real-time controls for trading, order management, profit and loss, and general ledger. In the third quarter of 2023, FIS signed new client contracts for this platform with several buy-side firms.

Derivatives marketplace CME Group is to launch options on S&P 500 Annual Dividend Index futures on 29 January, pending regulatory review, in response to client demand for additional flexibility to customise dividend-related strategies.

The company’s S&P 500 Annual Dividend Index futures traded more than 900,000 contracts in 2023, according to Paul Woolman, Global Head of equity products at CME Group.

The new options contracts are the latest addition to CME Group’s futures offering, which includes S&P 500 Annual and Quarterly Dividend Index futures, Nasdaq-100 Annual Dividend Index futures, and Russell 2000 Annual Dividend Index futures.

Hamza Lemssouguer, a former star trader at Credit Suisse, notched up a 32% return with his $2.7bn Arini credit master fund in 2023, making it one of the top performing credit strategies, according to a report by Bloomberg.

The report cites an unnamed sources with knowledge of the matter as revealing the gain along with a 26.7% gain for the $544m Arini structured credit equity fund, which Lemssouguer started in May.

According to data from Bloomberg, credit hedge fund returns averaged around 8% last year.

Lone Pine Capital, the $15bn Greenwich, Connecticut-headquartered hedge fund firm founded by Tiger Cub Stephen Mandel, bounced back with strong returns in 2023, following a wave of client redemptions and big losses in 2022, according to a report by Business Insider.

The report cites unnamed sources familiar with the matter as revealing that the firm’s flagship Cypress hedge fund strategy notched up a 20% return last year, while its long-only Cascade strategy, which holds the majority of the firm’s assets, returned 32%.

The funds chalked top losses of 38% and 42%, respectively in 2022, while Lone Pine has also faced a wave of client redemptions over the past 18 months, with clients pulling roughly $3bn from the firm in the 12 months ending July 2023, according to data from Bloomberg.

Hedge funds that make money from M&A arbitrage are set to benefit amid signs that the deal activity is beginning to recover after 2023 turned out to be the sector’s worst year for a decade, with deal volume totalling just $2.9tn, according to a report by Bloomberg.

The report cites data from Goldman Sachs Group as revealing an uptick in volume towards the end of last year reflecting the strongest level of activity since the beginning of fee current rate hiking cycle with $869bn of deals in Q4. And according to data from Hedge Fund Research, some event-driven hedge funds also surged in December having endured a difficult year.

Funds to see a revival in fortunes include Michel Massoud’s Melqart, which reversed its first-half loss of 4.4% to end 2023 with a 16% gain, and Kite Lake’s special opportunities fund, which recovered from having lost 5.5% through May to post a 10.7% gain, according to Bloomberg’s unnamed sources.

CastleKnight, an event-driven equity and credit firm started by Appaloosa Management alum Aaron Weitman, meanwhile recorded a 16.5% gain from 2023, having been down 6.5% at the end of May.

Multi-strategy major Citadel has parted company with two of its portfolio managers – Matthew Carter-Tracy and Jospeh DiGiacomo – while another – Ben Shapiro – is rejoining Ken Griffin’s $62bn firm, according to a report by Bloomberg.

The report cites unnamed sources with knowledge of the matter as confirming the departures of Carter-Tracy, who was an energy portfolio manager at Citadel’s fundamental equities business Surveyor Capital, and DiGiacomo, and the arrival of Shapiro, who is set to rejoin the business as a healthcare portfolio manager in May.

According to his LinkedIn profile, Shapiro previously worked for Surveyor between 2015 and 2020, before leaving for Balyasny Asset Management.

Eleven, a fintech providing solutions for hedge and private equity funds, has launched Eleven OS 7, which the company says brings “the new level of simplicity, centralisation, data transparency and data integrity to the global private investment process”.

At the core of Eleven OS 7 are Investor Profiles – secure repositories utilised for completing fund subscription documents, onboarding for KYC and AML and servicing investors. Eleven says the true power behind Eleven OS 7 lies in its ability for investors to maintain and update Investor Profile information across investments.

Eleven OS 7 facilitates changes to information, such as banking or address details, with an intuitive and centralised workflow, while accommodating the diverse, complex and decentralised data requirements, approval processes, and workflows connected to each investment.

The incorporation of environmental and social metrics into investment strategies is becoming increasingly common among hedge fund managers, according to a report by Bloomberg citing research by analysts at UBS Group.

The report cites a note published by the company’s Global Wealth Management business on Wednesday as saying that:
“Hedge funds have continued to step up sustainability integration into investment strategies,” and that there is also “a subset pursuing dedicated sustainable investment deployment via equity long/short and credit strategies, mostly within thematic equities and green, social and sustainable bonds.”

And with the prospect of lower interest rates in 2024, a recovery in green assets is expected to follow which, according to UBS, should in turn “increase confidence for business investment in areas tied to sustainability”.

Despite bonus season looming large, Goldman Sachs has seen several staff depart its London-based rates trading business to take up new positions at hedge fund firms in recent weeks, according to a report by eFinancial Careers.

The departures, some of which happened over the Christmas and New Year break, reportedly include VP-level rates trader Urvashi Chahal, who is believed to have joined Taula Capital, the new macro fund being spun out of Millennium Management by Diego Megia.

Meanwhile, Pushkar Jha, Goldman’s London head of inflation trading, is rumoured to be joining DE Shaw, while Shahil Ghelani, a European rates trader who was based in Paris, is believed to be joining Nomura, which in November announced plans to expand its trading business in the French capital.