Hedgeweek Features

Pleasant Lake Partners, the hedge fund led by Jonathan Lennon, has secured a capital commitment from Millennium Management, marking a significant expansion of its investment mandate, according to a report by Bloomberg.

The report cites unnamed sources familiar with the matter as revealing that Millennium has allocated at least $2bn in gross market value – including leverage – through a separately managed account (SMA). Sources indicate the funds will be deployed in a new strategy aimed at incubating investment talent.

Pleasant Lake Partners currently manages over $4bn in assets, excluding Millennium’s commitment. The firm invests across public and private markets, with a focus on consumer, telecommunications, media, and technology sectors.

In addition to hedge fund strategies, Pleasant Lake Partners is launching a private equity initiative designed to support companies seeking partnerships with investment firms that prioritise long-term holding periods.

The hedge fund has made high-profile investments, including a stake in L’Occitane, supporting its buyout by chairman Reinold Geiger last July. That deal was backed by Blackstone’s Tactical Opportunities group and Goldman Sachs Alternatives.

The firm, affiliated with Fund 1 Investments LLC, also holds positions in Tile Shop Holdings Inc, and BJ’s Restaurants Inc, according to securities filings.

Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund, has been appointed as an advisor to Indonesia’s newly launched $900bn sovereign wealth fund, Danantara, according to a report by Fortune.

The move is part of a broader effort by Indonesian President Prabowo Subianto to bolster investor confidence as he consolidates the country’s state-owned enterprises under a single investment entity.

Dalio joins a high-profile advisory team that includes renowned economist Jeffrey Sachs and former Thai Prime Minister Thaksin Shinawatra. Their appointments come at a critical time for Indonesia, as global investors raise concerns about governance and political interference in Danantara’s operations.

As the founder of Bridgewater Associates, Dalio brings decades of experience in navigating global macroeconomic trends, particularly in emerging markets. His deep ties to China – where he has invested for over 40 years – underscore his expertise in Asian economies, making him a strategic addition to Danantara’s advisory board.

Dalio’s appointment signals an effort to reassure institutional investors, including hedge funds, that Danantara will adhere to global investment best practices. Since the beginning of the year, Indonesia’s financial markets have struggled amid a major selloff, with stocks hitting four-year lows and the central bank intervening to stabilise the rupiah. Investors have been wary of the sovereign wealth fund’s governance structure, as it reports directly to Prabowo, raising fears of political influence in investment decisions.

Dalio’s insights into Asian capital markets come at a time when investors are pivoting away from Southeast Asia and back into China, where equities have staged a strong rebound. His involvement with Danantara could help counteract this trend by positioning Indonesia as a viable investment destination despite recent market volatility.

With Chinese stocks surging in 2024 following years of economic uncertainty, Indonesia faces an uphill battle to attract capital. Danantara, with an initial $20bn investment budget this year across 15-20 projects, aims to revitalise investor interest in Southeast Asia’s largest economy.

For hedge funds and institutional investors watching Southeast Asia, Dalio’s appointment is a crucial development. His macroeconomic insights and risk management expertise, honed through Bridgewater’s flagship Pure Alpha strategy, could shape how Danantara deploys its vast capital pool.

Equity Data Science (EDS), a provider of investment process management software, has strengthened its advisory team with the addition of seasoned industry professionals Perry Boyle, Jay Chandler, Phil Vilhauer, and Vikas Kalra.

The four bring expertise in hedge fund management, investment banking, risk management, and fintech innovation, and all have extensive backgrounds in global finance and technology.

Boyle, CEO of MITS Capital, a defense tech investment bank in Ukraine, previously held leadership roles at Salomon Brothers, Alex. Brown & Sons, and Point72 Asset Management, and was a founding partner of Thomas Weisel Partners.

Chandler, former Senior Managing Director and Head of Equity Syndicate at Evercore, played a key role in building the firm’s equity underwriting business, and also held leadership positions at Merrill Lynch and Bank of America Merrill Lynch, including Head of Global Equity Syndicate.

Vilhauer, former Deputy Head of Global Equities at Citadel and Managing Director and Head of Global Trading at Point72, has deep expertise in global trading, portfolio management, and investment analytics.

Kalra, founder of Reliable Revenue Partners, a fintech and data advisory firm, previously led risk and portfolio analytics teams at MSCI and held senior roles at Cross River, Alkymi, and FXCM.

In a press statement, Greg McCall, Co-Founder and President of EDS, said: “We’re thrilled to welcome Perry, Jay, Phil, and Vikas to our advisory team. Their extensive industry experience will be invaluable as we continue to enhance our platform and drive better investment outcomes for our clients.”

Since its inception in 2012, EDS has supported institutional investors ranging from start-ups to large asset managers and hedge funds. The firm recently launched Nexus, a next-generation risk and portfolio management solution designed to streamline workflows and provide deeper insights for investment teams.

Lazard and Arini Capital Management, the $7.9bn credit-focused hedge fund founded by ex-Credit Suisse star trader Hamza Lemssougue have entered into a strategic partnership to expand direct lending solutions across the EMEA region.

Through the agreement, Arini will gain access to Lazard’s corporate and sponsor advisory network, while Lazard’s clients will be introduced to Arini’s private credit strategies – potentially opening new capital solutions for mid-market borrowers.

The deal marks a notable step for hedge funds deepening their involvement in private credit. Arini’s Europe-focused direct lending fund, set to launch with backing from British Columbia Investment Management Corporation (BCI) and other institutional investors, aims to capitalise on financing gaps in the middle market.

“Arini has deep roots across European and global credit markets where we have been seeing significant convergence between public and private credit,” said Lemssougue in a press statement. “We are excited to partner with Lazard’s sector, country, and product bankers across Europe to provide access to financing opportunities, with the goal of generating strong risk-adjusted returns for our investors.”

Lazard’s move to bolster its private credit capabilities aligns with a broader trend of hedge funds stepping into areas traditionally dominated by banks. The agreement will allow Lazard to enhance its capital solutions offering while providing Arini with a steady pipeline of direct lending opportunities sourced through Lazard’s advisory network.

The deal comes as private credit continues to attract significant institutional capital. The EMEA mid-market lending space is viewed as particularly ripe for expansion, with hedge funds and alternative credit managers stepping in to fill gaps left by traditional lenders amid tighter banking regulations.

“Positioning Arini’s credit investment capabilities alongside Lazard’s origination creates a highly differentiated and scalable approach to pursue European direct lending opportunities, particularly in the core middle market,” said Daniel Garant, EVP & Global Head of Public Markets at BCI.

Under the agreement, Lazard will retain its independence in providing financing advice to clients, while Arini will maintain full autonomy over its investment decisions. The collaboration is expected to provide institutional investors with access to an alternative private credit strategy at a time when the sector is experiencing heightened demand.

An unexpected rise in the cost of equity financing is pressuring some hedge funds and asset managers, while presenting a lucrative opportunity for cash-rich investors, according to a report by Bloomberg.

The financing spreads on S&P 500 Index futures – embedded costs that allow investors to gain stock exposure without purchasing shares outright – have surged in recent months. After hitting record highs late last year, these costs remain above historical norms, even as markets have experienced recent turbulence.

Hedge funds often rely on futures to maintain market exposure while preserving capital. Instead of buying stocks outright, they use leverage, paying a financing spread on top of a risk-free interest rate. As more firms have piled into these trades, competition has driven up spreads, increasing financing costs for money managers.

“The dislocation is very large compared to the spread’s historical range, and the S&P 500 is one of the most canonical, most liquid markets in the world,” said Ashwin Thapar, head of multi-asset class investing at DE Shaw Investment Management.

Despite the S&P 500’s recent correction, which typically alleviates funding pressure, spreads have remained elevated. According to JPMorgan, the three-month implied financing spread on S&P 500 futures has fallen from December’s peak of 1.8% to about 0.6%, yet this remains in the top quintile of the past five years. Long-term financing costs remain stubbornly high.

For institutional investors with available capital, such as pension funds and sovereign wealth funds, these elevated financing spreads offer attractive returns. Firms like Janus Henderson are capitalising on this by engaging in cash-and-carry arbitrage – buying S&P 500 stocks while selling futures contracts against them.

“The pickup of equity financing spreads makes this trade extremely attractive right now,” said Natasha Sibley, a manager on Janus Henderson’s multi-strategy team.

Other hedge funds, lacking the same balance sheet capacity, are turning to alternative plays like trading calendar spreads – betting on changes in financing costs over different maturities. Demand has surged for CME’s Adjusted Interest Rate (AIR) Total Return Futures, with open interest in the product exceeding $255 billion this year.

The persistence of high financing costs suggests a structural shift in equity markets. Regulatory constraints on bank balance sheets limit their ability to provide financing, creating a supply-demand mismatch. As a result, hedge funds must navigate an environment where leverage is more expensive, while large institutional investors stand to benefit.

However, some market participants believe this trend may be temporary. Pete Hecht, head of the North America portfolio solutions group at AQR Capital Management, noted that surging demand for S&P 500 products last year fuelled higher financing costs. With stock market exuberance cooling in 2024, spreads could normalise over time.

While many major hedge funds have struggled in March’s turbulent markets, Chris Rokos’ macro hedge fund has bucked the trend, gaining 3.4% up top the end of last week, according to a report by Business Insider, citing an unnamed source familiar with the firm’s performance.

The $20bn fund is also in positive territory for the year, though exact year-to-date returns remain unclear.

Rokos Capital Management, known for its high-conviction, directional macro trades, has a history of delivering strong returns in volatile environments. The firm made nearly $1bn in a single day following Donald Trump’s 2016 election victory and delivered an impressive 31% return in 2023.

March has proven challenging for many hedge funds, as volatility surged to its highest levels this year due to shifting global trade policies and macroeconomic uncertainty. Brevan Howard, a leading macro player and Rokos’ former firm, suffered losses in its Master Fund earlier in the month, bringing its year-to-date drawdown to over 5%, according to Bloomberg reports.

Beyond macro strategies, multi-strategy powerhouses including Citadel, Millennium, Point72, Balyasny, and Schonfeld also faced setbacks in early March, though industry sources indicate some recovery in recent weeks.

Hedge funds with significant exposure to US Treasury (UST) trades are seeking an exemption from the US Securities and Exchange Commission (SEC) that would enable them to clear repo trades through their own affiliated clearing entities, according to a report by Rick.net.

The move comes as firms prepare for the SEC’s upcoming Treasuries clearing mandate, which is expected to reshape the landscape of UST trading.

The proposed exemption would allow hedge funds to execute trades through one entity and subsequently transfer them internally to another entity for central counterparty (CCP) clearing. This inter-affiliate exemption could help alleviate concerns over limited clearing capacity and provide funds with greater flexibility in meeting the new regulatory requirements.

The SEC’s Treasuries clearing mandate is aimed at bringing increased transparency and risk management to the UST market, but industry participants have raised concerns about the potential strain on existing clearing infrastructure. By leveraging their own clearing entities, hedge funds aim to mitigate operational bottlenecks while maintaining compliance with the new regulatory framework.

Hedge funds and money managers sharply reduced their bullish positions on natural gas last week, marking the steepest decline in a year, as unseasonably warm forecasts threaten to erode demand for the heating fuel, according top a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that long-only positions across seven natural gas contracts fell by 65,372 contracts to 626,232 in the week ending 18 March. This reduction pushed net-long positions to their lowest level in over a month, reflecting a bearish shift in market sentiment.

The move comes on the heels of a rise in short positions last week, coinciding with the start of the so-called “shoulder season” – a period between peak winter and summer demand when natural gas consumption typically declines.

Further weighing on sentiment, updated weather forecasts on Friday indicated warmer-than-normal temperatures across much of the US through the end of March, particularly from the Midwest to the East Coast, according to commercial forecaster Maxar Technologies Inc.

Balyasny Asset Management has recruited Johnny Kang, a former Managing Director at Citadel, as a portfolio manager in its Greenwich, Connecticut office, marking another high-profile talent move between the two multi-strategy hedge funds, according top a report by eFinancial Careers.

Kang, who previously served as head of research for Citadel’s convertible arbitrage team, spent four years at the firm’s New York office. Before that, he was a Managing Director in systematic fixed income at BlackRock and spent over seven years as a portfolio manager at AQR Capital Management before taking a break to pursue a PhD at Harvard.

Following Kang’s departure, Citadel reallocated his responsibilities internally and will not seek a direct replacement.

Hedge funds are ramping up their bearish bets on European stocks, with a particular focus on financials, materials, energy, and industrial companies, according to a report by Bloomberg citing data from the prime brokerage unit at Goldman Sachs.

The bankreported that hedge funds were net sellers of European equities for the second consecutive week ending 21 March, extending a broader trend that has seen more short positions than long ones in four of the past five weeks.

The selling pressure has been concentrated in individual stocks rather than broader indices, with hedge funds taking aim at companies in Germany, Italy, the Netherlands, Denmark, and the UK. Among the most heavily shorted sectors were building and construction materials, along with financials – areas that have been particularly vulnerable to macroeconomic headwinds.

In February, asset manager Schroders and home improvement retailer Kingfisher ranked among the most crowded European short positions, according to data from Hazeltree, which tracks hedge fund holdings across 700 asset management firms. Regulatory filings show that hedge funds have since increased their bets against these companies.

Several prominent hedge funds have disclosed new or expanded short positions in March. AKO Capital, Man Group, Kintbury Capital, and Marshall Wace have all placed short bets against Kingfisher, while Kintbury Capital has also opened a short position in Schroders.

Meanwhile, energy services firm Petrofac has emerged as the UK-listed company with the highest proportion of its outstanding shares held in short positions, according to the UK Financial Conduct Authority (FCA). Investment firms Helikon Investments and TFG Asset Management currently hold sizable bets against the company.

Kingfisher, Petrofac, and Schroders all reportedly declined to comment on the short positions, while representatives for Man Group and Marshall Wace also declined to provide statements. AKO Capital, Helikon Investments, TFG Asset Management, and Kintbury Capital did not immediately respond to Bloomberg’s requests for comment.

Joseph Oughourlian, the founder of activist hedge fund Amber Capital, is fighting to maintain control of Spain’s most influential media group, Promotora de Informaciones SA (Prisa), as a coalition of pro-government Spanish investors seeks to push him out, according to a report by Bloomberg.

For over a decade, Oughourlian has been the driving force behind Prisa, the owner of Spain’s leading newspaper El País, leveraging his nearly 30% stake – the maximum allowed before he must make a takeover offer – to steer its strategic direction. However, tensions with Spain’s ruling Socialist party have escalated, particularly after he blocked plans for a new pro-government television station.

Now, a shareholder group led by television producer and former Prisa executive José Miguel Contreras — holding nearly 19% of the company — is working to remove him.

The battle has transformed into one of Spain’s most high-profile corporate disputes, drawing parallels with last year’s high-stakes short-selling attack on pharmaceutical giant Grifols SA. This fight though, has broader implications, pitting a foreign hedge fund investor — backed by French billionaire Vincent Bolloré — against Spain’s political establishment in a test of foreign ownership in national media.

The outcome of this power struggle may hinge on the support of Bolloré’s Vivendi SE, Prisa’s second-largest shareholder. Oughourlian is actively working to maintain Vivendi’s backing, while his opponents are reportedly exploring ways to influence the French tycoon’s stance, including leveraging the state-backed telecom giant Telefónica SA’s business ties with Bolloré’s advertising firm Havas.

Reports indicate that Spanish Digital Affairs Minister Óscar López and Telefónica Chairman Marc Murtra recently met with Vivendi’s CEO in Paris to discuss the situation. While López has denied any link between the meeting and Prisa, the gathering has fueled speculation over potential government intervention.

Prisa’s financial situation adds another layer of complexity to the fight. The company is burdened with €800m in debt, and Oughourlian is negotiating with creditors—including Pimco—to refinance upcoming maturities. As part of this effort, he is reportedly pushing for a “key-man” clause that would trigger changes in debt terms if he is removed, effectively creating a poison pill to deter his ouster.

A potential capital increase is also under discussion, which could further shift the power dynamics among major shareholders, including Mexican billionaire Carlos Slim and Banco Santander—both of whom have yet to take sides in the dispute.

With a critical shareholder meeting scheduled for June, both factions are intensifying efforts to rally investor support. Oughourlian has taken an increasingly combative stance, assuming the role of El País chairman on 16 March. The next day, he published an op-ed comparing attempts to wrest control of the newspaper to tactics used during Spain’s Franco era – an incendiary reference as the country approaches the 50th anniversary of the dictator’s death.

Adding another layer of intrigue, Prisa’s 2023 issuance of convertible bonds could come into play. The pro-government camp fears that Oughourlian or an ally may hold a significant unconverted stake, potentially tilting the balance in his favour when voting rights are exercised.

Data has fundamentally altered the way the hedge fund industry trades and operates. There is an ever-growing use of quantitative strategies and two-thirds of hedge funds currently use data in their investment decision-making to manage portfolios and analyze portfolio risk. This Hedgeweek rapid read report, published in partnership with MSCI, explores how hedge funds use data.

Cybersecurity firm Rapid7 is close to reaching a settlement with activist hedge fund firm Jana Partners, following discussions on strategies to enhance shareholder value, including operational improvements and a potential sale, according to a report by Reuters.

The report cites unnamed sources familiar with the matter as revealing that under the proposed agreement, three new directors would be added to the company’s eight-member board, signalling a significant governance shift. The deal could be announced as early as this week, though discussions remain fluid, the sources noted.

Jana Partners, which disclosed a 5.8% stake in Rapid7 in March, has been pushing for changes as the company grapples with declining share performance. Over the past year, Rapid7’s stock has dropped 41%, with a 28% decline year-to-date, bringing its market capitalisation down to approximately $1.8bn.

The Boston-based firm, which specialises in vulnerability management and cybersecurity solutions, has faced increasing competitive pressures as corporate clients scale back security spending amid macroeconomic uncertainty.

Reuters previously reported that Rapid7 had engaged investment bankers to explore strategic alternatives after attracting acquisition interest from private equity firms, including Advent, Bain Capital, and EQT.

Hedge funds trading FX may soon find a familiar voice on the other end of the line with Robert Diehl, a seasoned FX trader with nearly three decades of experience across major banks, having taken on a broking role at Caventor Capital according to a report by eFinancial Careers.

Diehl, who previously held senior FX trading positions at RBS, UBS, and Unicredit, has joined Caventor – the agency brokerage arm of Boston Consulting Group (BCG) – following a brief hiatus after Unicredit reportedly shifted its FX trading operations from London to Milan in early 2023.

Unlike his past roles overseeing CEEMEA FX options, emerging markets trading, and global FX derivatives, Diehl is understood to be stepping into a sales position at Caventor, leveraging his expertise to attract hedge fund clients.

Caventor, which has been quietly building its hedge fund client base, appears to be reinforcing its team with industry heavyweights. Alongside Diehl, the firm has recruited Paul Lynn, a former Credit Agricole sales head, and James Ludlam, a former Nomura trader.

Hedge fund Elliott Associates is exploring additional steps to take against the London Metal Exchange (LME) over the cancellation of nickel trades in March 2022, the firm confirmed on Monday, according to a report by Reuters.

The US-based hedge fund, which has already claimed damages of $456.4m, is challenging the LME’s decision to suspend nickel trading after prices surged to a record high of over $100,000 per tonne on 8 March, 2022. The LME subsequently voided all trades on that day.

This development comes after the UK’s financial regulator, the Financial Conduct Authority (FCA), last week fined the LME £9.2m for its mishandling of the nickel market, marking the first-ever enforcement action against a UK exchange.

In response, Elliott said it is “carefully reviewing the FCA’s Final Notice” and is considering what further action, if any, it may take in relation to the matter.

Dubai is considering sweeping regulatory changes aimed at strengthening its position as a global hub for hedge funds, with the emirate’s financial watchdog reviewing key policies to reduce barriers for money managers, according to a report by Bloomberg.

The Dubai Financial Services Authority (DFSA) is undertaking a comprehensive review of existing regulations to streamline requirements and eliminate unnecessary regulatory burdens, a spokesperson for the agency confirmed. The DFSA oversees the Dubai International Financial Centre (DIFC), home to a growing number of hedge funds and investment firms.

Among the proposed changes is a reduction in minimum capital requirements for certain asset managers. The DFSA is also evaluating adjustments to liquidity requirements, including lowering the amount of emergency capital firms must hold and potentially removing the need for regulatory approval when hiring key personnel.

If implemented, these reforms would mark the most significant regulatory shift in nearly two decades, bringing Dubai’s financial framework closer in line with the UK and EU standards. The changes are subject to further industry consultation and could take effect in 2026.

Dubai has witnessed a steady influx of hedge funds, solidifying its reputation as a key financial hub. Currently, more than 70 hedge funds operate within the DIFC, including Andurand Capital Management and Point72 Asset Management, with the majority managing over $1 billion in assets.

The DFSA emphasised that the proposed adjustments would maintain alignment with international best practices while creating a more attractive regulatory environment for fund managers.

The DFSA currently operates a four-tier licensing system, with the most notable changes proposed for Category 3 firms, which manage client assets.

Key proposals include lowering the baseline capital requirement to $140,000, from $230,000, following an initial reduction from $500,000 two years ago, and reducing minimum capital thresholds to $40,000 from $70,000 for locally domiciled, small-scale funds.

In addition teh DFSA is considering changes to wind-down capital rules witth Managers who do not hold client funds possible seeing the elimination of mandatory liquidation reserves. For those who do, required capital buffers may be reduced to 25% of annual fixed overhead costs, down from 35%.

Another potential, change would see Category 3 firms being required to hold reserves based on assets under management (AUM), client funds, and trading volume, while certain compliance and finance officers, as well as senior managers, may no longer require DFSA approval, shifting responsibility for vetting hires to firms themselves.

To support the growing hedge fund community, DIFC is developing additional office space, with a newly retrofitted building set to open by the end of April. The expansion reflects Dubai’s broader ambitions to attract startup hedge funds and global investment players.

Hedge funds and asset managers have turned bearish on the US dollar for the first time since Donald Trump’s election victory last year, marking a significant shift in market sentiment, according to report by Business Times.

The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that speculative traders held $932m in net short positions on the dollar as of 18 March – an abrupt reversal from mid-January, when they had amassed $34bn in long-dollar bets.

The shift reflects growing concerns over the impact of Trump’s economic policies, Federal Reserve rate expectations, and broader uncertainty surrounding the US economy. Market confidence in a stronger dollar at the start of 2025 has given way to apprehension over potential trade wars, public sector job cuts, and restrictive immigration policies.

At the start of the year, many hedge funds and investment strategists had forecast a strong dollar, expecting Trump’s policies and a limited number of Federal Reserve rate cuts to support the currency. However, growing concerns about economic fragility have reinforced expectations for at least three Fed rate reductions by early 2026. While the Bloomberg Dollar Spot Index saw a slight uptick last week, it remains on track for its worst monthly performance since late 2023.

Deutsche Bank strategists noted in a 19 March report that Trump’s trade policies, once viewed as a bullish catalyst for the dollar, are losing their perceived strength. Meanwhile, Credit Agricole revised its dollar forecast downward, citing the underestimation of how a US-led global trade war, public sector layoffs, and immigration restrictions would weigh on growth.

Hedge funds Balyasny Asset Management and Citadel have poached equity portfolio managers from each other, intensifying the battle for top trading talent as bonus season concludes and professionals seek new opportunities, according to a report by Reuters.

The report cites unnamed sources familiar with the matter as revealing that Balyasny has recruited David Brodsky, a healthcare-focused equity Portfolio Manager from Citadel’s Surveyor Capital unit. Brodsky, who has over two decades of experience, will join Balyasny in 2027 after serving a non-compete period.

Citadel has also hired Jeremy Simon, a former Balyasny Portfolio Manager who was part of its Anthem program, which grooms top-performing senior analysts for portfolio manager roles. Simon, who had been with Balyasny since January 2024, will join Citadel’s Ashler Capital division in 2026, focusing on technology, media, and telecommunications investments.

Moving in the opposite direction, biotech investor Isai Peimer, previously at Citadel’s Surveyor Capital, has already started as a Portfolio Manager at Balyasny following a year-long non-compete agreement.

Hedge funds have ramped up bearish bets on US stocks at the fastest pace since 2020, reinforcing expectations of further market declines, according to a report by Reuters citing a client note from the prime brokerage division at Goldman Sachs.

Rather than pulling back entirely though, hedge funds increased short positions more aggressively than long ones in March, as the S&P 500 dropped nearly 5%. In contrast, global stocks excluding the US are on track for their strongest first-quarter performance since 2019, rising 8% so far.

Hedge funds executed their fastest equity sell-off in four years during the first week of March, dumping stocks over a 48-hour window as the S&P 500 fell 3.1%, marking its worst weekly performance in six months.

The Federal Reserve’s downward revision of US economic growth and increased inflation projections, coupled with uncertainty surrounding President Donald Trump’s trade tariffs, have further pressured market sentiment.

Hedge funds have notably cut exposure to tech and media stocks, bringing allocations to a five-year low. Some funds have initiated short positions on AI-related companies, while tech-focused hedge funds have posted negative 4.1% returns in March. Meanwhile, healthcare-focused funds are down 1.5%, according to Goldman Sachs.

The bearish stance on US equities is not mirrored in European and Asian markets, where hedge funds have exited losing trades without re-entering.

Despite broader market volatility, systematic hedge funds –which use algorithmic and quantitative strategies – have thrived, posting 8.9% gains year-to-date.

Meanwhile, global stock-picking funds have started to recover, gaining 1.5% in 2025 after suffering their worst two-week stretch since May 2022.

UK regulator the Financial Conduct Authority (FCA) has fined the London Metal Exchange (LME) £9.2m ($11.9) over its mishandling of the 2022 nickel crisis, marking the first-ever enforcement action against a UK exchange.

The ruling has reignited concerns within the hedge fund community about market transparency, risk controls, and regulatory oversight in commodity trading.

Hedge funds, including Elliott Associates, were among the hardest hit when the LME voided $12bn worth of trades on 8 March, 2022, following an unprecedented nickel price surge. The price of nickel soared past $100,000 per metric ton, doubling in just hours, forcing the exchange to cancel transactions and triggering lawsuits from financial firms claiming hundreds of millions in losses.

While the LME ultimately won the lawsuit, the case exposed significant shortcomings in market controls. Jennifer Han, Chief Legal Officer at the Managed Funds Association (MFA), warned that the lack of a robust regulatory response risks eroding investor confidence in UK markets.

For hedge funds specialising in commodity trading strategies, the FCA’s findings underscore systemic risks within the LME’s governance structure. The investigation found that only junior staff were monitoring trading during the early hours of 8 March, delaying escalation to senior management. Analysts say the absence of real-time oversight and poor market stress protocols exacerbated the crisis.

Despite the controversy, nickel trading volumes on the LME have rebounded to their highest levels since 2015, with many market participants resuming activity. However, concerns remain that hedge funds and other institutional investors could rethink their participation in LME markets if confidence in the exchange’s risk controls does not improve.

The LME has since implemented enhanced monitoring and risk protocols, acknowledging that over-the-counter (OTC) market activity played a significant role in the price spike.