Hedgeweek Features

Short-sellers had a lucrative year betting against Ocado, as the company’s share price plunged by more than 50% during 2024, on the back of ongoing doubts about the long-term demand for its robot-operated warehouses, according to a report by The Times.

A key setback came when Sobeys, a major Canadian client, postponed the launch of an automated warehouse in Vancouver over the summer. Additionally, Ocado’s demotion from the FTSE 100 in June underscored investor concerns, contributing to its sharp decline. The company’s market value now stands at £2.5bn.

Ocado wasn’t the only company to deliver big returns for short-sellers, with Rio Tinto, the world’s second-largest miner, seeing its stock lose 20% of its value in 2024. Weak iron ore prices and declining demand from China, the world’s largest consumer of raw materials, fuelled the drop, with short-sellers reaping paper profits of £113.2m from positions in the firm, according to Ortex data.

Spirits maker Diageo, electricity supplier National Grid, fund manager Abrade, and pharmaceuticals group Astra Zeneca, meanwhile, all provided short sellers with profits in excess of £50m.

Despite these successes, 2024 wasn’t entirely smooth sailing for short-sellers, with the FTSE 100 rising for the fourth consecutive year, complicating bearish bets. Several high-profile trades resulted in significant losses, including the London Stock Exchange Group (LSEG), with shares climbing nearly 25% as investors embraced its positioning as a technology company rather than a traditional stock exchange and leaving short-sellers with paper losses of £369.6m.

After years as a reliable target for short bets, BT’s 15% share price increase in 2024 cost short-sellers £262m, while Hargreaves Lansdown (£148.2m), Anglo American (£144.4m), and Rolls-Royce (£132.8m), all left short-sellers nursing big paper losses.

Global digital assets funds racked up a record $44.4bn of inflows during the course of 2024, four-times the previous annual high set in 2021, according to the latest Digital Assets Fund Flows Weekly Report from CoinShares.

And 2025 is off to a strong start too, with $585m of inflows in the first week of the year.

Bitcoin dominated 2024, seeing $38bn of inflows representing 29% of AUM, while ether saw a resurgence in late 2024, bringing full year inflows to $4.8bn.

Altcoins (exETH) saw inflows of $813m last year, accounting for just 18% of total AUM.

Hedge funds have significantly increased bearish positions on the Australian dollar, capitalising on the currency’s vulnerability as concerns over US tariffs and a sluggish Chinese economy weigh heavily on its value, according to a report by Bloomberg.

Data from the Commodity Futures Trading Commission for the week ending 31 December reveals that leveraged funds have boosted short positions on the Aussie to their highest levels since March 2022. Analysts suggest there could be further room for these bearish bets, given the currency’s sensitivity to shifts in risk sentiment.

“The Aussie continues to serve as the Group-of-10 ‘whipping boy’ for any adverse developments in non-US economic growth,” said Ray Attrill, Head of Foreign-Exchange Strategy at National Australia Bank. “The December build-up of speculative shorts aligns perfectly with the poor price action the Aussie experienced throughout the month.”

Over the past three months, the Australian dollar has depreciated more than 7% against the US dollar and underperformed every Group-of-10 currency except the New Zealand dollar. A slowdown in China—Australia’s largest trading partner—has further dampened the outlook for the Aussie, prompting traders to offload the growth-linked asset.

In Asian trading on Tuesday, the Australian dollar edged up 0.1% to 62.49 US cents.

Multi-strategy hedge funds delivered impressive performance in 2024, with many, including Millennium Management, Citadel, and DE Shaw, achieving double-digit gains, making it a standout year for the industry, according to a report by Bloomberg.

Millennium posted a 15% return, marking its best year since 2020, putting Izzy Englander’s fund neck-and-neck with Ken Griffin’s Citadel, which returned 15.1%. Notably, Citadel had far outperformed Millennium in 2022 by 26 percentage points.

Other funds saw even higher returns with DE Shaw’s flagship Composite Fund gained 18%, while its macro-focused Oculus Fund surged 36%, showcasing the potential for outsized gains in macro strategies.

Mid-sized and smaller funds also thrived with ExodusPoint Capital Management, led by Michael Gelband, achieving an 11.3% return, its best result since 2020. Balyasny Asset Management, meanwhile, rebounded with a 13.6% gain in its Atlas Enhanced Fund, while Schonfeld Strategic Advisors saw approximately 20% returns across its funds.

While the multi-strategy space thrived, the broader hedge fund industry also demonstrated resilience amid market challenges, with funds including Marshall Wace, Walleye, and Sculptor Capital Management, all contributing to the strong overall industry performance.

Alfonso Peccatiello, a former investment head at ING Germany and now a prominent social media market commentator, is set to debut his new hedge fund, Palinuro Capital, on 13 January, according to a report by Financial News London.

Peccatiello will serve as Chief Investment Officer of the fund, which focuses on interest rates and FX derivatives. The team includes Roozbeh Haghighi, Co-Founder and Head of Trading and Operations, and Vincenzo Brigandi, a Quantitative Analyst.

Peccatiello spent over seven years at ING, where he began as a Portfolio Manager in 2014 and later became Head of Investments for ING Germany, overseeing a $20bn portfolio.

The report quotes Peccatiello as saying in an interview that: “This role provided invaluable experience in managing large portfolios with a focus on fixed income and derivatives”.

Palinuro Capital’s debut comes amid a period of significant hedge fund sector headwinds, with new fund launches at their lowest levels in nearly a decade in 2024. By the third quarter of the year, only 123 new hedge funds had debuted, a sharp decline from the 2017 peak of 697, according to Preqin data.

Prominent short-seller Hindenburg Research has taken a short position against Carvana after accusing the online auto retailer of significant financial impropriety, alleging that the business model is unsustainable and its subprime loan portfolio poses major risks, according to a report by Bloomberg.

In a detailed report titled: “Carvana: A Father-Son Accounting Grift for the Ages”, Hindenburg accuses Carvana of lax underwriting standards, questionable financial practices, and reliance on a related-party company owned by Ernie Garcia II, the father of Carvana CEO Ernest Garcia III, to bolster results.

Carvana’s shares fell 1.9% after the report’s release, though they had surged 284% last year amid improving results and optimism about the company’s financial recovery.

In response, Carvana dismissed Hindenburg’s claims as “misleading and inaccurate,” stating they echo arguments made by other short-sellers. A company spokesperson said Carvana has been one of the most scrutinised public companies since its 2017 IPO and criticised the report as an attempt to profit from a stock price decline.

Hindenburg’s report centres on accusations of insider profiteering and risky loan practices, and claims the Garcia family has profited heavily from stock sales, with $3.6bn sold between 2020 and 2021 and an additional $1.4bn during last year’s stock rally.

A former Carvana director also alleged the company approved nearly 100% of loan applicants, raising concerns about the quality and risks of its subprime loan portfolio.

Hindenburg alleges Carvana manipulated results by selling vehicles at inflated prices to DriveTime, a car dealership owned by Ernie Garcia II. This practice, the report claims, helped Carvana avoid markdowns.

The report also states that Carvana had the highest increase in borrower extensions among subprime issuers, facilitated by a DriveTime affiliate that services some Carvana loans, and that Carvana allegedly benefits from generous reimbursements from DriveTime on extended warranty plans while absorbing significant costs, a tactic Hindenburg claims boosts the company’s financial performance.

A record number of activist investors launched campaigns against global companies in 2024 reflecting growing momentum for shareholder activism and fuelling expectations of continued growth in 2025, according to a report by Reuters citing new research by Barclays.

The report quotes Jim Rossman, Global Head of Shareholder Advisory at Barclays, as saying that: “Looking back at 2024, it feels almost as if there was a shareholder revolt”.

According to Barclays, there were some 45 first-time activists among the 160 investors, including hedge funds, that pressured companies to implement changes including strategy enhancements, operational improvements, and CEO replacements. This represents an 18% increase from 2023, when 135 investors – including 31 newcomers – pushed for corporate change.

The total number of campaigns climbed to 243 in 2024, slightly below the 2018 record of 249 but surpassing the 229 campaigns in 2023.

Investors were emboldened by significant returns, with some high-profile activist-driven campaigns yielding nearly 30% gains. By comparison, the S&P 500 rose 23% during the same period.

“Investors are no longer content to wait for promised improvements. They’re demanding immediate action,” said Rossman.

The focus of campaigns continued to shift toward operational and strategic improvements, which accounted for 26% of demands, up from 19% in 2021. Conversely, M&A-related demands dropped to 22%, compared to 43% during the 2021 global deal volume peak.

Analysts expect divestment-driven campaigns to rise in 2025, driven by regulatory changes under the Trump administration, which is anticipated to be more favourable to corporate deals.

A record 27 CEOs were replaced in 2024, up from 24 in 2023 and a four-year average of 16.

Nearly half of all campaigns were launched in the United States, with 115 campaigns in 2024 – a 6% increase from 2023. US-based activists like Elliott and Trian also pursued international opportunities, particularly in Europe and the Asia-Pacific region, with campaigns targeting companies like Tokyo Gas and Nippon Steel.

Activity in the Asia-Pacific region surged, while European campaigns slowed. The number of global campaigns jumped 67% from the third to the fourth quarter of 2024, signalling continued growth into 2025.

Multi-strategy hedge fund major Citadel recently offered its investors the option to cash out profits following a 15.1% gain in its flagship Wellington fund in 2024, but most opted to leave their capital invested in the fund, according to a report by Bloomberg.

The report cites an unnamed sources familiar with the matter as revealing that out of the billions of dollars in profits Citadel generated last year, only about $300m is being withdrawn. This marks a departure from past practices when profit distributions were mandatory rather than optional.

The move to make profit withdrawals optional highlights the increasing scarcity of opportunities for investors to access top-performing hedge funds. With many high-demand funds no longer accepting new capital – and some returning money to clients – investors are eager to maintain their allocations with established firms like Citadel.

A Citadel representative declined to comment.

Citadel, which manages $66bn in assets, has returned a total of $25bn in profits to clients since 2017. The firm’s founder, Ken Griffin, noted in a recent interview that the trend of returning capital has fuelled the growth of multi-strategy hedge funds, which employ teams of traders and diverse investment approaches to deliver steady returns.

New York-based hedge fund major DE Shaw is planning to return billions of dollars to external clients after its flagship hedge funds delivered exceptional double-digit gains in 2024, according to a report by Bloomberg.

The report cites unnamed sources familiar with the matter as revealing that the firm’s multi-strategy Composite Fund achieved an 18% return, while its macro-focused Oculus Fund soared 36%, marking its best annual performance since launching two decades ago.

DE Shaw, which manages over $65bn in assets, is expected to distribute roughly half of 2024’s profits from both funds back to investors. Though the exact sum remains undisclosed, the capital return is estimated to be in the billions, reflecting a growing trend among leading hedge funds to cap assets under management to sustain high returns.

In 2023, DE Shaw returned all profits from these funds to clients, despite single-digit gains that year.

The Composite Fund, launched in 2001, has maintained remarkable consistency, posting double-digit gains in 18 of its 23 years and delivering an annualised net return of 12.7%. It invests across a diversified mix of systematic, hybrid, and discretionary strategies spanning asset classes and geographies.

The Oculus Fund, meanwhile, which debuted in 2004, focuses on macroeconomic bets and boasts an unblemished track record with no losing years. It has generated 13.7% annualised net returns since inception.

DE Shaw’s performance underscores the appeal of hybrid strategies that integrate algorithmic trading with discretionary and private equity approaches. Last year, both funds recorded gains across all major strategy types, further solidifying their reputation for resilience and adaptability.

Third Point, the $12bn alternative investment firm founded by Daniel S Loeb, has agreed to acquire AS Birch Grove, an $8bn alternative credit fund manager, with the transaction expected to close during the first quarter of the year.

The deal will see Birch Grove become a subsidiary of Third Point, with current owner American Securities exiting the business.

Third Point, known for its event-driven equity and credit strategies, has steadily expanded its credit offerings since launching dedicated credit funds in 2020. The acquisition of Birch Grove will enhance Third Point’s capabilities in alternative credit, particularly in collateralised loan obligations (CLOs), opportunistic private credit, and high-yield bonds.

Third Point’s recent ventures include the 2024 launch of Malibu Life, a Cayman Islands-based life and annuity reinsurer, as part of its broader strategy to enter liability-driven investing. The addition of Birch Grove’s diversified credit expertise aims to further serve Third Point’s investors across asset classes.

Following the acquisition, Birch Grove CEO and CIO Jonathan Berger will retain his leadership role at Birch Grove while also becoming Co-Head of Credit at Third Point alongside Partner Ian Wallace. Other key Third Point credit leaders — Shalini Sriram, Chris Taylor, and Stephen Schatzman — will continue to lead their respective strategies, maintaining focus on structured, private, and opportunistic credit.

While Birch Grove and Third Point’s existing funds will operate separately, Berger will collaborate with Third Point’s leadership to develop new investment products that leverage the firms’ complementary credit platforms.

Founded in 2013, Birch Grove manages $8bn across various credit strategies, with over $5bn in CLO investments. The firm employs 17 credit analysts and five credit origination professionals, sourcing opportunities across North America and Europe. Its senior leadership, including Berger and President Andrew Fink, will remain in place post-acquisition.

In a press statement, Loeb said: “Birch Grove’s businesses further diversify our credit platform. Their well-established CLO franchise and complementary private credit capabilities align perfectly with our strategic goals. Together, we’ll deliver compelling solutions for our investors seeking alternative-credit opportunities.”

Jefferies acted as Third Point’s financial advisor, with legal counsel provided by Willkie Farr & Gallagher. Birch Grove was advised by GreensLedge Capital Markets and Schulte Roth & Zabel. American Securities was represented by Weil, Gotshal & Manges.

Pershing Square Capital Management, the New York-based investment firm led by Bill Ackman, has concluded its PSVII funds, a finite-life co-investment vehicle established to hold shares in Universal Music Group NV (UMG).

The funds will now distribute approximately 47 million UMG shares — representing 2.6% of the company’s equity — to non-Pershing Square-affiliated limited partners.

The decision to distribute UMG stock instead of cash aligns with Pershing Square’s view that the music company is significantly undervalued at its current price. The tax-free distribution allows limited partners to maintain direct exposure to UMG’s equity while avoiding immediate capital gains liabilities.

In a press statement, Bill Ackman and Pershing Square emphasised their long-term confidence in UMG, noting the firm’s continued ownership of roughly 140 million shares, representing 7.6% of the company. These shares are held within Pershing Square’s core funds, including Pershing Square Holdings, Pershing Square, and Pershing Square International, as well as by Ackman, his affiliates, and Pershing Square employees.

Pershing Square initially acquired its UMG stake in 2021, purchasing 10% of the company from Vivendi at a price of €18.28 per share, including capitalised costs. Over the three-and-a-quarter years since the investment, UMG has delivered a total return of 46%, including €1.66 per share in dividends, outperforming major benchmarks like the S&P 500 (37% return) and the Amsterdam Exchange Index (21% return) over the same period.

UMG remains the largest holding across Pershing Square’s funds with Ackman and his affiliates confirming that they are not selling any shares in connection with the PSVII fund distribution.

In the statement, Pershing Square wrote: “We continue to see Universal Music Group as a compelling investment with significant potential for growth and value creation over time.”

The PSVII funds were established in September 2021 with a finite term ending 31 January, 2025, to hold UMG shares acquired during Pershing Square’s negotiated transaction with Vivendi. Since inception, the PSVII funds have generated a net value increase of 52% in euros (33% when converted to US dollars), reflecting their UMG holdings’ strong performance and dividend reinvestments.

Cryptocurrency prime brokerage FalconX is nearing a deal to acquire Arbelos Markets, a crypto derivatives startup founded in 2023 by industry veterans Joshua Lim and Shiliang Tang, according to a report by Bloomberg.

While the financial terms of the acquisition remain undisclosed, the transaction is expected to involve a mix of cash and stock. An official announcement is anticipated in the coming days.

FalconX has had its eye on Arbelos for some time, participating in the startup’s $28m seed funding round earlier this year, which was led by Dragonfly and included notable investors such as Circle Ventures, Deribit, Paxos, and StarkWare. The valuation of Arbelos during that funding round and for this acquisition has not been publicly revealed.

FalconX itself achieved a valuation of $8bn following a $150m funding round in 2022, backed by investors including Tiger Global, GIC, and B Capital. Since its founding in 2018, FalconX has raised $430m across multiple funding rounds and operates in several major financial hubs, including the US, UK, Malta, India, Singapore, and Hong Kong.

The acquisition of Arbelos aligns with FalconX’s strategy to expand its offerings in the fast-evolving crypto industry. Earlier this year, the firm launched a foreign exchange desk in London, providing access to 20 major forex pairs like the US dollar, euro, and British pound. This service targets crypto trading firms, exchanges, and brokers, bridging the gap between traditional and crypto FX markets.

FalconX has faced regulatory challenges, with its Seychelles-based subsidiary recently settling a $1.8m case with the Commodity Futures Trading Commission (CFTC) for operating in the US without proper registration.

Bullish bets on oil surged to their highest levels in four months during the penultimate week of 2024 following a surge in activity by hedge funds during the previous week, as investors adjusted their positions ahead of Donald Trump’s return to the White House, according to a report by Bloomberg.

Money managers increased net-long positions on West Texas Intermediate (WTI) crude by 21,694 contracts to a total of 182,895 contracts during the week ending 24 December, according to data from the Commodity Futures Trading Commission. This shift occurred despite WTI trading within a narrow $3 range that week, suggesting the positioning was driven by longer-term strategic bets rather than immediate price movements.

While concerns about a potential supply glut and subdued demand from China are weighing on the market, investors appear to be hedging against upside risks linked to geopolitical and political developments.

Donald Trump’s return to the presidency has added uncertainty to oil markets, particularly regarding US policy towards Iran, a major oil exporter. Ongoing conflicts in Ukraine and the Middle East further contribute to the potential for price volatility in 2025.

Algorithmic traders, who turned net-long on both WTI and Brent crude earlier in December, have continued to expand their positions, according to Bridgeton Research. Their sustained optimism reflects expectations that geopolitical risks and shifting global demand could provide a floor for oil prices in the months ahead.

Dmitry Balyasny, founder of the $20bn multi-strategy hedge fund Balyasny Asset Management, has overseen the overhaul of the firm’s equities division in response to underperformance in 2023, according to a report by Business Insider.

Known for its stock-picking prowess, the firm has shifted its focus toward deeper research and long-term investments, moving away from excessive trading.

The reports quotes Balyasany as explaining during an interview at the firm’s London office in Mayfair, that his equities teams had been “trading too much and not investing enough.” The “top-down philosophical” shift emphasises rigorous research and longer investment timelines, prioritising ideas that can play out over several months or quarters, an adjustment that has led to lower portfolio turnover and steadier performance.

The results are already apparent. By the end of November 2024, Balyasny’s firm posted an 11.6% return, a significant rebound that positioned it competitively within its peer group.

The equities team’s challenges were partly attributed to the industry’s reliance on alternative data, such as credit card transactions and email receipts, which has become standard across hedge funds. According to Senior Portfolio Manager Steve Schurr, who was promoted to the equities leadership team in mid-2023, the firm had become overly focused on short-term “quarter calls,” a strategy he believes offers diminishing returns.

Schurr, a former protégé of legendary short-seller Jim Chanos, has led efforts to revamp the firm’s research processes. Under his guidance, Balyasny introduced Telescope, an internal AI-powered research database, and hired a 15-person research team comprising data scientists and journalists. These initiatives have completed over 120 projects this year, emphasising primary research to deliver a “durable edge.”

“We’re back to the basics of being good investors,” Schurr said, emphasising that equity selection now accounts for 80% of a portfolio manager’s opportunities.

Unlike many industry titans who have stepped back from direct trading, Balyasny has resumed managing his own portfolio. This hands-on approach aligns with his belief that trading alongside employees fosters connection and mentorship.

Peter Goodwin, another key leader, is set to launch Longaeva Partners, a new internal equities unit named after the bristlecone pine, one of Earth’s oldest tree species. Goodwin’s team aims to hire portfolio managers who align with the firm’s research-driven philosophy.

Balyasny’s firm has evolved significantly since its 2018 struggles, when it cut 20% of its staff and lost $4bn in investor capital. Today, equities account for 40% to 50% of the firm’s risk, compared to 90% in 2018. Additionally, institutional investors now make up 70% of the firm’s client base, providing a more stable capital foundation.

Millennium Management, the multi-strategy hedge fund major led by Izzy Englander, recorded a 2.5% gain in December, bringing its total returns for 2024 to 15%, but short of the S&P 500’s 23% gain for the year, according to a report by the Financial Times.

The reports cites unnamed sources familiar with the matter as revealing the performance figures at the firm, which oversees $72.1bn in assets across more than 320 investment teams, employing a variety of trading strategies. Millennium’s centralised risk system is designed to mitigate large losses, a hallmark of the multi-manager approach.

Founded in 1989 with just $35m, Millennium has grown into one of the largest players in the $4.5tn hedge fund industry. Englander remains the sole owner of the firm, which, alongside Ken Griffin’s Citadel, has spearheaded the rapid growth of multi-manager hedge funds.

Millennium declined to comment on the year’s performance.

Hedge fund manager Crispin Odey is seeking at least £79m in damages from the Financial Times, filing a libel lawsuit against the publication, according to a report by the Guardian citing court documents.

Odey initiated the legal action in May in response to four articles published in 2023 that accused him of sexually assaulting or harassing multiple women. These allegations led to his departure from Odey Asset Management (OAM), the hedge fund he founded, although he has since returned to the firm.

In addition to his lawsuit against the FT, Odey faces separate legal action from five women who are suing him over alleged misconduct spanning from 1995 to 2023.

Odey has consistently denied the accusations, describing them as “rubbish” in a statement to the FT. The publication, for its part, stated in May that it would be “vigorously defending” its reporting.

Legal documents filed at the High Court, reviewed by the PA news agency, reveal that Odey’s lawyers claim he has suffered significant financial losses due to the articles, although he is limiting his claim to £79m in damages.

Adam Speker KC, for Odey, said: “The articles complained of made allegations against the claimant of a gravely defamatory nature, including allegations of clearly criminal conduct.”

He continued: “The claimant has suffered very serious harm to his reputation as a result of the publication of the articles complained of and is likely to continue to do so until he achieves vindication through these proceedings.”

“The claimant has suffered serious distress and embarrassment as a result of the publication of the articles complained of,” he added.

The four articles central to the lawsuit were published between June and July 2023.

In June, the FT reported speaking to 13 women who said they had been abused by Odey, while in July, it added that a further six women accused him of sexual assault or harassment.

Following the allegations, OAM, founded in 1991, was gradually wound down as several banks severed ties with the company, though it remained a registered entity.

According to Companies House records, Odey was reinstated as a director of the firm in late September, on the same day that nine former partners officially resigned.

Speker further noted in the court documents that since the publication of the first FT article on 8 June 2023, Odey has been unable to find alternative employment, resulting in an estimated loss of future earnings of £144m.

The FT is required to file its defence by the end of January 2025, with another hearing in the case expected at a later date.

In May, the publication issued a statement saying: “Our investigative journalism about Mr Odey was carefully prepared and publication was in the public interest. We stand by our reporting and look forward to vigorously defending it.”

Citadel founder Ken Griffin was only half correct last month when he claimed the multistrategy hedge fund boom had “come and gone,” according to a report by Bloomberg.

While the total assets under management by these multimanager funds have slightly declined compared to 2023 – partly due to firms like Citadel returning billions of dollars in profits to clients – the sector remains robust.

These so-called pod shops are thriving, with several ranking among the largest hedge funds globally. Demand for the top players is strong, performance improved in 2024, and the fierce competition for talent to trade billions shows no sign of abating.

Griffin has predicted consolidation among smaller multimanagers, many of which have emerged over the past 15 years.

Currently, 53 such firms are managing a combined $366bn as of the end of June, a slight drop from $369bn at the same point in 2023, according to a September report by Goldman Sachs Group. Net outflows during this period totalled approximately $31bn – the first net outflows recorded since at least 2017, per Goldman’s data.

However, the outflows were not solely due to clients exiting. Roughly one-third of the withdrawals stemmed from hedge funds proactively returning capital to clients, concerned that managing excessive amounts might hurt performance. Some of the larger firms plan to follow suit in 2025.

Citadel has consistently returned profits to investors, amounting to $25bn since 2017, and managed $66bn as of 1 December 2024.

In a first for the firm, Steve Cohen’s Point72 Asset Management announced in September that it would return profits after its assets surpassed $35bn.

Investors have flocked to multimanager funds in recent years due to their steady returns, even amid volatile markets. Over the past five years, Citadel’s assets have doubled, matching the growth trajectory of Izzy Englander’s Millennium Management, which managed $72bn at the start of December. New managers also made notable debuts in 2024, with Bobby Jain and Diego Megia each raising more than $5bn for their funds.

Multimanagers account for about 8% of the $4.5tn hedge fund industry, with most assets concentrated in a handful of large firms. Millennium, Citadel, Point72, Balyasny Asset Management, and Hudson Bay Capital Management all manage over $20bn each, placing them among the world’s largest hedge funds.

Unlike Citadel and Point72, Millennium actively markets its fund. This year, when it aimed to raise $10bn, investors pledged more than twice that amount.

As private wealth clients and other investors seek to increase their allocations to these managers, “multistrategy funds are finding new and creative ways to deploy that capital,” said Gordon Corbett, global head of consulting in prime financing at Bank of America Corp.
This includes hiring more internal teams, allocating funds externally to other hedge funds, and in some cases, venturing into private investment opportunities for the first time, Corbett added.

Some smaller funds’ performance improved in 2024, giving them a stronger footing to attract clients. Schonfeld Strategic Advisors, which nearly merged with Millennium before talks ended abruptly in late 2023, posted returns exceeding 17% for both of its funds through November 2024.

Cinctive Capital Management’s main fund delivered a 21% return through November, according to a person familiar with its performance. This follows a nearly 6% loss in 2023, as reported by the Employees Retirement System of Texas, one of its anchor investors.

Goldman Sachs noted that the 53 firms it tracks achieved an average gain of 5% in the first half of 2024, outperforming their total returns for 2023 and putting them on pace to match their five-year annualised average.

The current economic climate has been favourable, said Jon Caplis, head of hedge fund research firm PivotalPath.

“Higher interest rates not only generate positive rebates on short positions, they help separate corporate winners from losers, creating the security dispersion that multistrats require to perform,” Caplis explained.

With the largest players continuing to grow, the competition for top talent remains intense.

Balyasny spent $200m this year to recruit senior money managers as rival firms vie for the same traders capable of managing billion-dollar portfolios while mentoring younger analysts who could lead their own teams one day.

Across the multimanager landscape, investment staff increased by 13%, according to Goldman’s report. Firms have introduced or expanded clawback provisions on bonuses to retain employees and prevent defections to competitors.

Hedge funds are helping to drive MicroStrategy’s bitcoin acquisition strategy, with the company having announced another multimillion dollar purchase of the cryptocurrency, marking its eighth consecutive week of acquisitions, according to a report by Bloomberg.

Over the past two months, the software-turned-bitcoin treasury company has cemented its role as a leveraged proxy for cryptocurrency investments, backed by increasing hedge fund interest.

MicroStrategy revealed it acquired $209m worth of bitcoin between 23 and 29 December, purchasing 2,138 tokens at an average price of approximately $97,837 per token. While Bitcoin prices have eased from their recent highs above $100,000, hedge fund-driven demand has continued to propel MicroStrategy’s purchasing momentum.

Hedge funds have emerged as key players in MicroStrategy’s capital-raising and bitcoin buying spree. Utilising convertible arbitrage strategies, funds are buying the company’s bonds while shorting its shares, taking advantage of the stock’s high volatility.

According to 13F filings, hedge funds increased their holdings in the company by over 50% in the past two quarters, with notable names such as Renaissance Technologies, Millennium Management, and Two Sigma Investments ramping up their exposure.

The company, led by Co-Founder and Chairman Michael Saylor, has leveraged hedge fund interest to secure capital at a rapid pace. MicroStrategy aims to raise $42bn through stock sales and convertible debt offerings over the next three years, with the majority of this funding earmarked for bitcoin purchases.

MicroStrategy’s focus on growing its bitcoin holdings has transformed it into a dominant player in the cryptocurrency market, driving its market capitalisation to over $80bn, earning the company a spot in the Nasdaq 100 Index in the process.

To maintain its buying momentum, MicroStrategy is seeking shareholder approval to increase the number of authorised Class A common and preferred stock, as outlined in a recent proxy statement, a move aimed at providing additional flexibility for capital raising as hedge funds continue to drive demand for its convertible bonds and stock offerings.

The board of Edinburgh Worldwide Investment Trust, managed by Baillie Gifford and offering shareholders an opportunity to invest in Elon Musk’s SpaceX, has increased its resistance to a takeover attempt by Saba Capital Management, according to a report by The Times.

The New York-based fund management firm, an activist investor led by Boaz Weinstein, has amassed stakes worth a combined £1.5bn across seven investment trusts and has requisitioned shareholder meetings to install its own directors, aiming to replace the current fund managers with its own team.

However, Jonathan Simpson-Dent, the chairman of Edinburgh Worldwide, has urged shareholders to reject Saba’s efforts, emphasising that the trust offers unique access to cutting-edge businesses in science and technology, stating: “I see Edinburgh Worldwide as offering huge opportunities to all its shareholders and I am determined to ensure that can continue.”

Investment trusts, listed on the stock market, have boards of directors, but the funds are managed by external firms. These trusts can trade at discounts to the value of their investments if a manager’s stock picks perform poorly or if there is insufficient demand for shares.

Last year, Edinburgh Worldwide saw its discount widen to over 20%, but this gap has since narrowed. The trust has been working to improve performance, including replacing key members of the Baillie Gifford team and narrowing its investment focus. The fund also announced a £130m share buyback to return value to shareholders.

Saba holds a 21% stake in Edinburgh Worldwide and is pushing for changes at three of Baillie Gifford’s funds: Edinburgh Worldwide, the US Growth Trust, and Keystone Positive Change.

Additionally, Saba has targeted two trusts managed by Janus Henderson, the Henderson Opportunities Trust and European Smaller Companies Trust, as well as the CQS Natural Resources Growth & Income Trust. The largest of these is Herald, valued at £1.2bn.

South Africa’s rand could be set for a rebound after hedge funds triggered a dramatic sell-off of long rand-dollar futures, in one of the steepest positioning reversals in recent history, according to a report by BNN Bloomberg.

Citing data from the Commodity Futures Trading Commission, hedge funds reduced their net long positions from 27,927 contracts to just 1,422 in the week ending December 17.

The liquidation of futures contracts in mid-December led to the currency’s worst December performance since 2015 and its sharpest quarterly drop in over two years.

Despite the sell-off, the rand has erased all of its 2024 gains and is hovering near its weakest levels since the May elections. However, options traders are betting that the fundamentals that fuelled the rand’s pre-December rally will resurface after the New Year.

Key indicators, such as six-month risk reversals, which measure the premium of options to sell the rand over those to buy it, are at record lows. Similarly, one- and three-month risk reversals are also approaching historic lows. This suggests that the cost of hedging against further rand declines is now cheaper than it has been in years, signalling that the December shakeout may be over.

At the end of last week, the rand increased by 0.5%, trading at 18.7463 per dollar in Johannesburg, after briefly surpassing the 19 mark on Wednesday 25 December.