Hedge Fund News | Hedge Week

Nicolás Dujovne, who served as Argentina’s economy minister until 2019, saw his hedge fund firm Tenac Global Fund, deliver a stellar 22% net gain in 2024, buoyed by strategic bets on high-risk sovereign debt, particularly Argentine bonds, according to a report by the Buenos Aires Times.

Tenac’s 2024 returns significantly outpaced the broader market, more than tripling the performance of developing-world benchmarks. According to industry data from BarclayHedge, Tenac ranked as the second-best emerging market fixed-income hedge fund globally, with its Argentine bond positions alone contributing nearly 700 basis points to its performance.

With approximately $144m in assets under management, Tenac capitalised on a surge in Argentine debt prices, spurred by President Javier Milei’s market-friendly economic agenda. Milei’s reforms have sent sovereign bond prices soaring to levels not seen since Dujovne’s tenure as Argentina’s economic chief under former President Mauricio Macri.

After leaving government in 2019 amid a turbulent post-election selloff, Dujovne co-founded Tenac in 2020 alongside Fernando Jasnis, also a former Economy Ministry official, and José Antonio González Anaya, Mexico’s former finance minister. They were later joined by Pablo Guidotti, a senior Argentine official from the 1990s.

The hedge fund’s gains were part of a broader rally in high-yield emerging market (EM) debt. A Bloomberg index tracking EM high-yield dollar bonds surged 15% in 2024, marking its best performance since 2016. Credits from Argentina and Lebanon delivered triple-digit returns, while investment-grade EM debt lagged at just 1.9%.

QuantCube Technology has launched the Hydric Stress Indicator, a new tool designed to help commodity traders, financial institutions, agricultural growers, and food producers to monitor drought risks in key crop-producing regions across 20 countries.

Using real-time meteorological data and satellite imagery, the QuantCube Hydric Stress Indicator tracks water stress levels in the soil and provides early warnings of potential drought, categorised by agricultural commodity type, including for Corn, Soybean, Wheat, and Rice. By delivering daily insights into water stress levels, the indicator helps traders to forecast supply risks, anticipate price volatility, and optimise their strategies in an increasingly climate-driven market.

The QuantCube Hydric Stress Indicator demonstrates clear correlations between drought conditions and commodity price volatility to help commodity traders to optimise their trading strategies.

Provided at the country and regional levels, the QuantCube Hydric Stress Indicator delivers a comprehensive and actionable view of drought risks, enabling more informed decisions to mitigate the impact of extreme weather on the value of agricultural commodities.

The QuantCube Hydric Stress Indicator is available alongside QuantCube’s Agricultural Yield Forecasts, covering corn, soybean, wheat and rice at regional, national and global levels. By delivering real-time insights on the growth of these crops, the indicators provide a daily estimate on total yields at the end of the harvest up to eight months in advance of the publication of official data.

Cheyne Capital’s hedge fund focused on Europe, the Middle East, and Africa is significantly increasing its exposure to the United Arab Emirates (UAE), citing the country’s stability as a buffer against potential fallout from US President Donald Trump’s policies, according to a report by Bloomberg.

The report cites fund manager Carl Tohme as highlighting that the UAE’s currency peg to the dollar is one of the key factors making it an attractive equity market, noting that this peg offers a level of security in repatriating local equity gains, a benefit that many emerging markets can’t provide due to vulnerability to sudden currency fluctuations. While several developing countries use currency pegs, Tohme pointed out that the UAE’s financial strength gives it a unique ability to maintain this peg effectively.

The Cheyne EMEA Fund delivered a 13.1% return last year, outperforming the MSCI benchmark for the region by a wide margin. This performance was bolstered by a $73bn stock-market rally driven by robust UAE economic growth and government-backed support for domestic companies. Key contributors to the fund’s success included Salik, the toll operator whose shares surged by 74%, and Emaar Properties, a state-backed developer that saw its stock climb by 62%.

Tohme believes that in a global environment marked by uncertainty, the UAE’s stable currency, low debt-to-GDP ratio (under 30%), and its strong financial infrastructure make it a highly appealing market. “In times of global fluidity, such as geopolitical shifts, changes in US trade policies, or the direction of US monetary policy, having a currency pegged to the dollar and stable fiscal fundamentals offers an attractive risk-reward profile,” Tohme explained.

Cheyne Capital, a UK-based alternative asset manager with a strong track record in real estate, has been steadily increasing its exposure to the Middle East. Apart from Salik and Emaar, Tohme expressed confidence in the long-term prospects of companies like Adnoc Gas and Aldar Properties, both of which stand to benefit from ongoing population growth in the UAE. “Continuing reforms, a growing population, no FX risk, visible earnings for many companies, and attractive dividend yields are key factors driving our positive outlook on the UAE,” Tohme added.

The firm is also eyeing opportunities in Saudi Arabia, particularly in companies tied to the government’s ambitious Vision 2030 strategy, which spans several key sectors, including entertainment, technology, and infrastructure. Despite challenges such as Saudi Aramco’s 15% loss in 2024, Tohme sees short-term negativity as an opportunity to enter these sectors at more favourable valuations. “While the market faces some short-term challenges, the long-term secular growth story remains intact,” he said.

Cheyne Capital is also backing Turkey, where the fund has seen success in both bank stocks and local bonds. While 2024 was a challenging year for Turkish equities, Tohme noted that the country’s commitment to orthodox monetary policy and efforts to reduce inflation should support future growth.

UK-based hedge fund Altana Wealth misused a competitor’s confidential information and trade secrets to establish its Venezuelan debt-focused fund, the Altana Credit Opportunities Fund (ACOF), London’s High Court ruled on Thursday, as reported by Reuters.

The ruling came after IlliquidX, another London-based firm, accused Altana of breaching a 2019 non-disclosure agreement (NDA), which was signed during brief talks between the two firms to collaborate on a fund targeting Venezuelan distressed debt. IlliquidX alleged it had shared sensitive information during these discussions, which Altana later used without permission to set up ACOF.

Justice Eason Rajah found that Altana had indeed breached the NDA and misused IlliquidX’s confidential information and trade secrets in both the creation and operation of its Venezuelan debt fund. However, the court dismissed IlliquidX’s claim of copyright infringement related to a slide presentation Altana used for marketing purposes.

Rajah clarified that Altana’s Founder and Chief Investment Officer, Lee Robinson, had not acted “willfully and knowingly” in misusing the confidential information, softening the blow to Altana’s leadership.

Altana and Robinson had argued throughout the case that the allegations were baseless, claiming there was no misuse of information that wasn’t already known to them or publicly available. Following the ruling, an Altana spokesperson expressed satisfaction that the court found Robinson had not acted knowingly in the misuse but disagreed with the broader findings of the judgment. The firm plans to seek permission to appeal.

IlliquidX initiated legal proceedings in 2020, shortly after Altana launched ACOF. The firm argued that its proprietary insights into Venezuelan credit opportunities were crucial to the fund’s creation and that Altana’s actions violated their prior agreement.

IlliquidX has yet to comment on the ruling.

Institutional investors have been turning increasingly to hedge funds as private equity dealmaking remains subdued, choosing to reallocate capital rather than re-upping their PE investments after deals close, according to a report by Reuters citing a survey by BNP Paribas.

The pivot highlights growing caution among large institutions navigating volatile public markets with investors seeking alternative strategies that are either less correlated to broader markets or positioned to profit from market swings.

“Markets have shifted from a pre-inflation environment, where everything was rising, to one where active management is regaining favour,” said Marlin Naidoo, Global Head of Capital Introduction at BNP Paribas.

BNP Paribas’ survey revealed that investors added a net $22.2bn to their portfolios last year, with nearly 20% of that reallocated from private equity to hedge funds. Additionally, investors moved capital out of traditional long-only equity and bond strategies in favour of hedge funds.

This trend comes after a period in 2022 and 2023 when investors pulled $52bn from top-performing hedge funds, largely to sustain private equity and venture capital allocations.

Global private equity and venture capital transactions totalled $35.28bn in January 2025, down $70m from January 2024, according to an S&P Global Market Intelligence report.

“This shift back to hedge funds signals a renewed appetite for active management,” Naidoo added, reflecting broader investor sentiment.

According to the survey, the outlook for hedge fund investments remains strong, with two-thirds of the 290 investors surveyed by BNP Paribas planning to increase their hedge fund allocations in 2025.

Robert Citrone, founder of Discovery Capital Management and a member of the famed “Tiger Cub” group of hedge fund managers, is bracing for a stock market correction by significantly cutting his firm’s equity exposure, according to a report by Institutional Investor.

The report cites Citrone as revealing in an investor letter in January that Discovery has reduced its net equity exposure to 25%, down from 50% at the end of 2024. The firm aims to go “flat to short” in developed markets in the coming weeks. Citrone has forecasted a market correction of 5-7%, which, while not a major sell-off, he believes warrants reducing risk and even taking short positions.

“We see valuations, sticky inflation pushing 10-year yields toward 5%, and uncertainty around tariffs and expenditure cuts by [Elon] Musk as key catalysts for a potential correction,” Citrone wrote in the letter.

Discovery Capital operates as both a macro trader and equities specialist. The firm posted a 2.9% gain in January, following impressive returns of 52% in 2024 and 48% in 2023. Despite this performance though, Citrone remains cautious, citing historically high valuations relative to interest rates and the global over-reliance on U.S. corporate investments across venture capital, private equity, and credit markets.

Citrone also highlighted a shift in the artificial intelligence (AI) narrative, spurred by the debut of China’s DeepSeek model, which has raised questions about the sustainability of current AI valuations. DeepSeek, reportedly developed at a fraction of the cost and energy consumption of competing systems, signals the early stages of AI’s commoditisation, Citrone explained.

“We believe this could reshape the broader AI ecosystem,” he noted, adding that Discovery has adjusted its AI-related positions accordingly.

Ray Dalio, founder of hedge fund major Bridgewater Associates, has issued a stark warning about the state of US government debt, calling for urgent action to reduce the budget deficit to avoid catastrophic economic consequences, according to a report by CNBC.

Speaking at the World Government Summit in Dubai, Dalio said: “It’s like being a doctor warning a patient about their condition — this is now very, very serious,” stressing that the US must reduce its budget deficit from the current 7.5% of GDP to 3% to avoid an “economic heart attack.”

The US gross national debt stood at approximately $36.22tn as of 11 February, with $28.8tn of that held publicly through securities owned by individuals, corporations, state and local governments, Federal Reserve banks, and foreign governments. High debt levels, Dalio noted, increase economic vulnerability, drive inflation, and place a heavy burden on future generations.

Dalio urged political leaders to take responsibility, stating: “Governments must commit to reducing the budget deficit or resign. This requires disciplined policy changes—like changing your diet and exercise routine for better health.”

He warned that failure to act could lead to a crisis in the bond market or broader economic instability. “If we experience the financial equivalent of a heart attack, we will know who is responsible because this situation is preventable,” he said.

When asked about his message to the Trump administration, Dalio emphasised practical and conservative fiscal measures. “How do you cut costs and raise productivity? You need to be conservative in your approach, use sharp pencils, and carefully evaluate the consequences of every action,” he advised.

Hazeltree, a provider of cloud-based treasury and liquidity management solutions for hedge funds and other asset alternative asset managers and their service providers, has appointed Lokesh Seth as its new Chief Executive Officer.

According to a press statement, Seth brings “extensive experience in driving digital transformation and scaling fintech SaaS companies, reaffirming Hazeltree’s commitment to delivering a best-in-class treasury platform for its clients”.

Seth joins Hazeltree having held President and Chief Operating Officer roles at Intapp and DealCloud, where he orchestrated a growth trajectory from $2m to over $200m in annual recurring revenue (ARR) over seven years, including a successful IPO in 2021. Earlier, as a Chief Technology Officer, Lokesh led iLevel, a Blackstone spin-off, establishing it as a market leader in private markets portfolio monitoring technology.

Hazeltree has also made additional leadership appointments, with Douglas Trafelet joining as Chief Commercial Officer, and Kyri Yiannakis being promoted to Chief Client Officer.

Institutional allocators are increasingly optimistic about the future of hedge funds, with senior investment professionals at Kepler Partners’ inaugural CIO Perspectives event all painting a positive picture of the hedge fund landscape

Executives from UBS, UBP Alternative Investment Solutions, and Lombard Odier highlighted diversification, enhanced return potential, and robust portfolio customisation as key attractions.

Panelists at the event, which brought top industry allocators together to discuss evolving trends in the hedge fund space, noted that over the past decade, the asset class has diversified significantly, offering a rich array of sub-strategies and manager approaches that meet varied risk and return objectives.

Farès Jaafar, CFA, Head of Hedge Funds at Bank Lombard Odier & Cie SA, highlighted the broad range of strategies available within hedge funds, explaining that these strategies allow investors to tailor portfolios to specific goals by targeting uncorrelated sources of alpha and achieving both return diversification and enhancement. “We look for strategies that offer convex returns, diversification benefits, and enhanced risk-adjusted returns with the compounding effect of alpha over time,” he said, also noting growing market optimism, driven by favourable macro trends and increased market dispersion, which is encouraging asset managers to boost their allocations.

Anthony Murphy, CFA, Managing Director at UBP Alternative Investment Solutions, emphasised the dual role of hedge funds in providing both diversification and enhanced returns, pointing out that the current environment, marked by volatility and divergent fiscal and monetary policies, creates strong opportunities for hedge fund strategies. “There has been a significant uptick in investor interest in hedge funds over the past 12 to 18 months, as clients seek to diversify away from traditional market returns and cushion against potential volatility shocks,” he said.

Karim Cherif, Head of Alternative Investments at UBS Global Wealth Management CIO, stressed that successful hedge fund investing hinges on meticulous manager selection, highlighting that understanding managers’ strategies and their consistency across market cycles is crucial for achieving desired outcomes. He also observed that post-pandemic, investors have increasingly recognised hedge funds as valuable complements to traditional assets like bonds and equities.

Elliott Investment Management has expanded its stake in US refiner Phillips 66 to more than $2.5bn, renewing its call for significant operational changes, including the sale or spin-off of the company’s midstream business, according to a report by Reuters.

The activist hedge fund’s announcement on Tuesday sent Phillips 66 shares up 3.3% in late morning trading.

The move marks a significant escalation for Elliott, which disclosed a $1bn stake in Phillips 66 last year. Following that investment, the refiner introduced a performance improvement plan aimed at boosting shareholder returns and its stock price. However, Elliott now claims that the initiative has fallen short.

“The plan failed to materialize, and it has become evident that urgent changes are needed,” Elliott said, citing Phillips 66’s underperformance compared to rival refiners.

Elliott outlined a vision for a leaner Phillips 66, suggesting the sale or spin-off of its midstream business, which the hedge fund estimates could be valued at over $60bn. The firm also proposed divesting other non-core assets, including Phillips 66’s interests in Chevron Phillips Chemical (CPChem) and its JET retail operations in Germany and Austria.

“A streamlined Phillips would be better positioned to deliver value to shareholders,” Elliott stated.

As of its last close, Phillips 66 had a market capitalisation of $51.09bn, according to LSEG data. The company has yet to comment on Elliott’s latest proposals.

In addition to asset sales, Elliott called for changes to Phillips 66’s board, urging the addition of independent directors to enhance accountability and oversee a review of the company’s management. The hedge fund also emphasised the need for ambitious refining targets and a renewed focus on profitability, particularly as refining margins have contracted for US refiners in recent quarters.

Elliott’s campaign at Phillips 66 is part of a broader strategy by the activist fund to reshape energy companies with the firm having recently disclosed a stake in oil major BP.

Ninety One has appointment Justin Jewell as Portfolio Manager in its Developed Markets Specialist Credit team, joining Darpan Harar as Co-Portfolio Manager on the Multi Asset Credit (MAC) and Global Total Return Credit (GTRC) funds.

Jewell, who will be based in London, will focus on the expansion of the Developed Market Specialist Credit platform.

Prior to joining Ninety One, Jewell was Managing Director and Head of European High Yield at RBC BlueBay Asset Management (RBC BlueBay), where he managed a team of 30 and oversaw $18bn in client assets across high yield, leveraged loan, CLOs, and multi asset credit.

Jewell joined RBC BlueBay in 2009 as Head of High Yield Trading before moving into portfolio management in 2012, later being named Partner and Co-Head of Global Leveraged Finance. Jewell began his career at UBS, where he joined as a graduate in 2002, and was later promoted to Director of High Yield Trading. He has a BSC in Economics from the London School of Economics.

Hedge funds turned bullish on US stocks last week, marking a notable reversal from the previous five weeks of selling, ramping up their buying at the fastest pace since November, according to a report by Bloomberg citing a Goldman Sachs prime brokerage report.

The note reveals that hedge funds recorded the highest net buying of individual stocks in more than three years, with the surge in buying especially pronounced in the information technology sector, where funds made their largest purchases since December 2021.

During what was the second-largest buying spree in the past five years, hedge funds both covered short positions and increased long holdings, with inflows particularly strong in software and semiconductor stocks.

Goldman Sachs’ Vincent Lin, Co-Head of Prime Insights and Analytics, noted that the renewed buying activity indicates hedge funds are now more constructive.

“The activity suggests that hedge funds became more constructive and started leaning into the AI theme following the DeekSeek-induced selloff on 27 January,” he said.

Ken Griffin, the founder of multi-strategy hedge fund major Citadel and market maker Citadel Securities, has issued a stark warning about the potential economic fallout from President Donald Trump’s aggressive tariff policies, according to a report by the Daily Mail.

The report cites Griffin during a UBS Group-hosted conference on Tuesday, as criticising the administration’s “bombastic rhetoric” on trade, calling it a significant risk to America’s long-term economic stability.

“The uncertainty and chaos created by the tariff dynamics between us and our allies is an impediment to growth,” Griffin stated. “It makes it difficult for multinationals, in particular, to plan for the next five, 10, 15, or 20 years.”

Griffin’s remarks follow Trump’s decision on Monday to impose sweeping tariffs, including a flat 25% on steel and aluminium imports and 10% tariffs on all goods from China. The president also threatened further measures against Canada and Mexico, escalating tensions with key trading partners.

Although Griffin has been a Republican donor and voted for Trump in the 2016 election, he has been a vocal critic of several of the president’s policies, particularly on tariffs and immigration. Griffin argued that the tariffs could harm US competitiveness, widen the trade deficit, and incentivise trading partners like Canada to diversify their customer base.

“A tariff on Canada’s energy products, for example, could push the country to strengthen ties with China or other trading partners,” he said.

Griffin expressed concern that Trump’s harsh rhetoric could have long-lasting repercussions. “The damage has already been done. CEOs and policymakers are starting to believe that they can’t depend on America as a reliable trading partner,” he warned.

Jordan Wruble, Head of the Investment Solutions group at Brown Advisory, is seeking investment strategies that strike a balance between closely tracking market benchmarks and delivering added performance, known as “portable alpha”, according to a report by CityWire.

“We’ve been exploring approaches that combine active management with low tracking error,” Wruble told Citywire. “These strategies aim to replicate benchmarks while incorporating some volatility and tracking error, allowing the core portfolio to still align closely with the index.”

As the leader of Brown Advisory’s Investment Solutions group, Wruble oversees due diligence for approximately 100 mutual funds, separately managed accounts (SMAs), and hedge funds recommended to private clients, including individuals, families, endowments, and foundations. His team is also responsible for selecting sub-advisors for four funds, including the $138m Brown Advisory – WMC Japan Equity Fund. Research into private market funds is handled by a separate team.

With $167bn in total AUM, Brown Advisory’s interest in portable alpha reflects a growing trend in the investment world. The strategy involves blending index-tracking investments with active, uncorrelated components designed to generate excess returns. The “portable” aspect refers to the alpha being independent of the benchmark, making it transferable across portfolios.

A recent survey by BNP Paribas highlighted the rising popularity of this approach, with 40% of hedge fund investors already using or planning to adopt portable alpha strategies. The survey covered 200 investors managing roughly $1.4tn in hedge fund assets.

“This tool allows portfolio managers to implement active strategies and pursue alpha without significantly compromising benchmark alignment,” Wruble explained, while emphasising the risks of active strategies that deviate too far from benchmarks, pointing to the challenges faced by some in 2024.

“We love active management — bottom-up, fundamental, long — but last year demonstrated the potential pitfalls of being underweight in concentrated markets,” he said.

While hedge funds are the primary players employing portable alpha, Wruble noted that the strategy is less common in liquid markets. “It’s unlikely to be a sub-advisory candidate for now, but you never know,” he added.

Hedge funds delivered an average return of 10.12% in 2024, with volatility five times lower than that of the MSCI World index — which climbed 19.22% — and generated 2.62% of alpha compared to none in 2023, according to the 2025 Hedge Fund Outlook report from BNP Paribas.

The report, based on a survey of 229 allocators managing or advising on approximately $1.4tn in hedge fund assets, provides an in-depth look at market sentiment and strategic shifts within the industry as investors increasingly chase alpha.

Over a three-year horizon, average hedge fund returns stood at 6.14%, closely tracking the MSCI World’s 6.88% return, but with significantly lower volatility and a beta of just 0.12, according to the report.

Ashley Wilson, Global Head of Prime Services at BNP Paribas, highlighted the growing role of separately managed accounts (SMAs) in driving asset growth. “The rise in allocations to separately managed accounts, driven by multi-managers and institutional allocators, will continue to be a key driver in asset growth this year,” Wilson said. “Multi-managers aim to generate platform alpha, while institutional allocators prioritise greater transparency and capital efficiency.”

Marlin Naidoo, Global Head of Capital Introduction at BNP Paribas, pointed to the improved performance of hedge fund strategies. “Hedge fund alpha increased in 2024, prompting more allocators to deploy capital across both fundamental and quantitative strategies for the year ahead,” he noted, underscoring a shift toward strategies that deliver tangible value despite their cost.

The report also reveals significant shifts in geographic allocation. The Asia Pacific region emerges as the most attractive market for 2025, with more than a quarter of respondents planning net additions — a stark contrast to just 2% in the previous year. Japan remains a key focus, with 20% of investors expecting net inflows, while a rebound is anticipated in China after years of capital outflows.

Sector preferences are also evolving. Equity long/short funds, particularly those focused on the Americas, have topped performance charts for a second consecutive year, displacing credit as the most sought-after strategy. Interest in event-driven strategies, meanwhile, more than doubled, with a quarter of investors looking to increase allocations compared to 11% in 2024. Additionally, portable alpha and active extension strategies are gaining traction, with a significant portion of investors planning to boost their current exposures or venture into these areas for the first time.

The survey findings also shed light on the growing influence of SMAs in hedge fund portfolios. Currently used by 26% of respondents, SMAs now account for 36% — or $185bn — of hedge fund assets. Meanwhile, private banks and wealth management firms, though traditionally representing a smaller slice of hedge fund allocations at an average of 4%, are set to expand their positions. These firms plan to add $14bn to their hedge fund exposure in 2025, up from $12bn in 2024, and intend to increase the number of new managers on their rosters.

Hedge fund investors are increasingly seeing their returns whittled away by the controversial ‘passthrough fee’ structure that allows firms to pass along nearly any expense, according to a report by Bloomberg.

As an example, the report highlights Balyasny’s flagship hedge fund, Balyasny Atlas Enhanced, which in 2023, generated a gross return of 15.2%, although after fees, investors were left with just a 2.8% gain.

These passthrough fees totalled over $768m for the year, covering costs ranging from employee compensation to office supplies and mobile phone services, and have become a hallmark of multi-strategy hedge funds including Citadel, Millennium Management, Point72 Asset Management, and ExodusPoint Capital Management, as well as Balyasny. Together, these five firms oversee more than $200bn in assets.

In Balyasny’s case, $670m — or 87% of the fees — went toward employee compensation and benefits, while other costs included recruiting, professional services, and travel expenses.

While critics argue that these fees can be excessive, others, see them as a trade-off for more consistent returns.

Multi-strats rely on these fees to attract top talent, invest in advanced technologies, and maintain flexibility in evolving markets. Firms say the structure helps reduce risk and improve performance, but the cost to investors is significant.

Bloomberg’s analysis shows that the list of eligible passthrough expenses among major multi-strats has grown by nearly 40% since 2018. While early disclosures focused on basic costs like rent and computers, today’s filings include items like artificial intelligence tools, severance payments, and even private jet bookings.

For example, Citadel’s recent filings detail passthrough costs that include employee gifts, snacks, and first-class travel. Between 2022 and September 2024, Citadel’s three largest funds charged $12.5bn in passthrough fees, with $11bn allocated to employee compensation.

ExodusPoint has taken a different approach by listing specific expenses it will not charge to investors, such as artwork. Still, firms like Point72 openly state in filings that there is “no limit” on the amount of passthrough expenses they can charge.

The impact on returns is stark. Multi-strats retained an average of 59% of every dollar they earned in 2023, up from 46% two years prior, according to BNP Paribas. This surpasses the traditional “2-and-20” fee model, where firms take 2% of assets under management and 20% of profits. For example, in 2023, ExodusPoint delivered an 11% gross return but charged 8.4% in passthrough fees, leaving investors with just over half of the gains. Similarly, Balyasny’s investors received only 18% of the fund’s gross returns after fees.

Despite the controversy, many investors remain loyal to multi-strats, betting on their ability to deliver steady annual returns of 12% or more with minimal downswings. The firms have avoided negative years in the past half-decade, a track record that appeals to clients seeking stability.

Bloomberg’s analysis used Form ADV Part 2 brochures that investment firms, including hedge funds, are required to submit annually to the SEC. The forms contain descriptions of a firm’s advisory businesses, investment strategies and fee structures.

The analysis focused on five of the biggest multistrategy hedge funds that have disclosed their passthrough fee structures since 2018, although research from Goldman Sachs shows that 80% of such firms have some sort of passthrough structure.

The rapid rise of multi-manager hedge funds could pose significant risks to financial stability due to correlated activity and their aggressive risk management practices, according to a report by Bloomberg citing comments from Bank of England (BoE) Governor Andrew Bailey.

The report cites Bailey as saying at the University of Chicago Booth School of Business in London on Tuesday, that combined, these factors could exacerbate market instability during times of stress.

While multi-manager hedge funds, also known as multi-strats or pod shops, have attracted the majority of hedge fund investment flows in recent times by promising steady, diversified returns Bailey cautioned that their structure, with traders organised into distinct strategies or pods, could amplify market disruptions.

“Multi-manager funds can make individual ‘pods’ deleverage rapidly in stress conditions, which can exaggerate market moves,” Bailey said. “There could be circumstances in which the means by which multi-manager funds protect themselves in this respect can create risks to the system.”

Responding to questions after his speech, Bailey also pointed to challenges stemming from the growth of non-bank financial institutions, including hedge funds. He noted that the scale of expansion in this sector is straining the capacity of prime brokerage. This area has grown increasingly concentrated, raising further concerns in the wake of events like the Archegos collapse.

While the multi-manager model provides benefits through its “sophisticated umbrella risk management” that mitigates fund-level concentration risks, Bailey warned that similar strategies pursued by different multi-manager funds could lead to systemic correlation.

Bailey’s remarks though have drawn criticism from the Managed Funds Association (MFA), which represents the alternative asset management industry, including hedge funds.

In a statement, Jillien Flores, the MFA’s Head of Global Government Affairs, said: “The structure of hedge funds enhances financial stability, as hedge funds have no government backstop, no liquidity mismatch, and losses are siloed to an individual fund and its sophisticated investors. Regulators have visibility into the activity of hedge funds through existing regulatory reporting and the funds’ broker-dealer counterparties. Through these channels regulators can monitor for risks to the financial system.”

Appaloosa Management, the hedge fund firm founded by David Tepper, significantly increased its stakes in China-related stocks and exchange-traded funds (ETFs) last quarter, ahead of the recent AI-fuelled rally in the country’s equity markets, according to a report by Bloomberg.

The report cites a regulatory filing made on Monday as revealing that Tepper, who made headlines in September by urging investors to buy “everything” tied to China, expanded Appaloosa’s holding in e-commerce giant JD.com by approximately 43% during the fourth quarter. He also increased the fund’s stake in Alibaba Group Holding by 18%, cementing it as the firm’s largest holding, accounting for 16% of its $6.4bn portfolio.

These moves came during a turbulent period for Chinese equities, marked by wavering investor sentiment. Following Beijing’s stimulus efforts in late September, Chinese stocks initially surged but lost momentum in subsequent months due to concerns over limited fiscal measures, a sluggish economic recovery, and ongoing property sector challenges. During the fourth quarter, Alibaba’s stock fell 20%, while JD.com dropped 13%.

In addition to increasing stakes in JD.com and Alibaba, Tepper expanded exposure to other China-focused assets, including the KraneShares CSI China Internet ETF, the iShares China Large-Cap ETF, and individual companies such as Baidu and KE Holdings. By the end of December, Chinese stocks and ETFs accounted for 37% of Appaloosa’s portfolio by market value, largely unchanged from the previous quarter.

Tepper declined to comment on the investments.

China’s equity markets have shown renewed strength early this year, with some benchmarks outperforming their US and European counterparts. The surge has been fuelled in part by the success of DeepSeek’s artificial intelligence model, which has enhanced the country’s standing in the global AI race and drawn investor attention back to Chinese tech firms.

The Hang Seng Tech Index, which includes many of China’s leading tech firms, entered a bull market last week, while the Hang Seng China Enterprises Index is nearing its October peak. Alibaba, which is working on its own AI initiatives, has seen its stock rise nearly 30% since the start of the year. Analysts believe Alibaba’s more diverse international operations may help it weather potential revenue disruptions from the ongoing US-China trade tensions better than its domestic peers.

US activist hedge fund Whitebox Advisors has intensified its opposition to the debt restructuring plan proposed by Austrian motorcycle maker KTM AG, accusing the company of employing “delaying tactics” to sideline its alternative proposal, according to a report by Bloomberg.

The dispute comes as creditors prepare to vote on KTM’s plan on 25 February, a critical step for the company following its insolvency filing in November.

Whitebox, a creditor holding KTM’s Schuldschein promissory notes, has presented a competing restructuring proposal promising at least a 45% recovery rate for lenders, significantly higher than the 30% outlined in KTM’s plan. The hedge fund’s proposal includes an option for lenders to provide fresh financing and invites existing shareholders to participate in a capital increase. Additionally, Whitebox claims to have interest from potential equity investors willing to inject capital if current shareholders decline to participate.

In contrast, KTM’s restructuring plan relies solely on its parent company, Pierer Mobility, to raise €900m ($930m) to stabilise the business.

Whitebox has criticised KTM for failing to engage in negotiations or respond to requests for information, accusing the company of delaying tactics to avoid addressing the alternative plan. In a letter sent to KTM’s management and seen by Bloomberg, Whitebox urged the company to consider its proposal, which it claims offers a more favourable outcome for creditors.

Without meaningful engagement, Whitebox plans to vote against KTM’s restructuring proposal. A rejection could push the motorcycle manufacturer into liquidation or a different insolvency process where the debtor loses control.

The hedge fund has been rallying support among other Schuldschein lenders, asserting that it has the backing of a “large” number of investors. Whitebox’s efforts are separate from those of another lender group advised by Houlihan Lokey.

Global hedge funds are increasingly buying Chinese stocks, with the pace accelerating significantly in early February, fuelled by the emergence of DeepSeek, a homegrown Chinese artificial intelligence startup, according to a report by Reuters.

The report cites a client note from Goldman Sachs referencing data up to 7 February as highlighting that Chinese equities, both onshore and offshore, are the “most notionally net bought market” on its prime brokerage book globally. The week of 3-7 February marked the strongest hedge fund buying activity in over four months, the report added.

The buying spree has been largely concentrated in single stocks, particularly within sectors such as consumer discretionary, information technology, industrials, and communication services.

Energy, utilities, and real estate stocks, meanwhile, saw outflows as hedge funds reallocated to higher-growth sectors in China.

The rise of DeepSeek, an innovative low-cost AI platform, has been a pivotal in reshaping global investor sentiment toward Chinese assets, with the startup’s success prompting a reevaluation of China’s role in the global AI landscape.

The sentiment has been further bolstered by Beijing’s policy-easing measures and relief over US President Donald Trump’s decision to impose a lower-than-expected 10% additional tariff on Chinese goods.

The MSCI China index has risen for four consecutive weeks since mid-January, gaining over 6% in February alone, outperforming major global markets.

Hedge funds allocations to Chinese equities now represents 7.6% of Goldman Sachs’ total prime book exposure, ranking in the 23rd percentile over the past five years, up from around the 10th percentile in January.