Hedgeweek Features

Hedge funds have significantly increased their stakes in US bank stocks, signalling strong confidence in the sector’s continued rally, boosting their exposure to financial firms by 50% to a combined $340bn, according to a report by Bloomberg citing 13F filings.

This wave of buying has contributed to a stellar year for financial shares, with the KBW Bank Index surging over 33% – outpacing the S&P 500 and the tech-heavy Nasdaq 100.

And hedge funds aren’t alone – US bank stocks have enjoyed a banner year, with analysts predicting further gains.

Wells Fargo’s Mike Mayo forecasts record net interest income by 2025, while Barclays’ Jason Goldberg anticipates near double-digit earnings-per-share growth over the next two years.

Optimism surrounding deregulation and tax cuts under the Trump administration has fuelled speculation of even greater potential, despite higher-than-expected interest rates from the Federal Reserve.

According to Mayo, the banking industry is experiencing simultaneous inflection points across deposits, loans, capital markets, and regulatory easing. “And these inflections are happening all at the same time,” he remarked.

Since the November election, expectations of regulatory relief, including more lenient capital rules, have lifted bank share prices. However, President-elect Donald Trump’s unpredictability poses potential risks, requiring bank executives to navigate uncertain political and economic conditions.

JPMorgan analysts, led by Vivek Juneja, warned that 2025 could be a year of two halves, with “near-term continued choppiness due to uncertainty related to policy changes, but a potential favourable resolution of capital requirements could be a positive” longer term.

Several prominent investors have also increased their stakes in US banks.

Stanley Druckenmiller’s Duquesne Family Office added major names like Citigroup and KeyCorp to its portfolio. George Soros’ family office increased its allocation to First Citizens BancShares, while other firms like Cercano Management and Iconiq Capital expanded their holdings in institutions like JPMorgan and Bank of America.

The bullish trend has not been without challenges.

Disappointing earnings reports caused setbacks earlier in the year, with Wells Fargo experiencing its steepest drop in three years after underwhelming net interest income results. Similarly, Citigroup and JPMorgan faced investor scrutiny over rising expenses and conservative forward guidance.

By the end of the year, however, stronger-than-expected results fuelled a recovery, with banks benefiting from higher interest rates. Barclays’ Goldberg highlighted the importance of net interest margins, which he expects to remain strong as rates stabilise at elevated levels.

Analysts at Wells Fargo predict continued earnings growth, citing the long-term value of deposits in a high-rate environment. At 5% interest rates, deposits could be four times as valuable as they were at 1%, potentially driving net interest income to record highs by 2025.

Strategas analysts ranked financials as the top-performing sector for both large- and small-cap stocks, citing leadership and momentum. Analyst Todd Sohn encouraged investors to view pullbacks as opportunities to increase exposure to the sector.

Not all analysts are optimistic. Morningstar’s Suryansh Sharma issued sell ratings on several major banks, including Goldman Sachs, Bank of America, and Wells Fargo, cautioning that lofty expectations make stocks vulnerable to negative surprises.

“A big risk signal is when stocks are priced for perfection,” Sharma said. “So when anything bad happens we have a re-rating.”

The broader outlook hinges on economic stability. Wells Fargo’s Mayo emphasised that a recession could derail the rally, saying, “If we have a recession, all bets are off.”

The Federal Reserve’s December meeting dampened expectations for rate cuts in 2025, causing a sharp 4.3% drop in the KBW Bank Index. Despite the market’s reaction, experts like Mark Luschini from Janney Montgomery Scott view such downturns as temporary corrections.

Barclays’ Goldberg believes that while regulatory changes could benefit banks, implementation will take time. He expects robust January earnings to showcase higher revenues and operating leverage but cautions that the full impact of Trump administration policies won’t materialise until later in the year.

Mayo remains bullish, predicting a shift in investor sentiment. “As confidence in sustained earnings growth builds, investors will transition from a short-term outlook to long-term commitments, making bank stocks a core holding,” he said.

Hedge funds were net sellers this week, reducing their exposure primarily in Industrials, Technology, and Energy sectors, while increasing their positions in Health Care and Consumer Discretionary, according to Investing.com, citing a report by Citi.

Long-only managers also pared back their exposure, with the most significant outflows seen in Real Estate and Energy, while boosting their holdings in Financials and Consumer Discretionary.

This week’s top-performing sectors were Technology, Consumer Discretionary, and Financials, while Energy, Health Care, and Real Estate lagged.

Market indicators show that the “Growth Shock” regime remains the most closely correlated, followed by the “Goldilocks” environment. Recent 22-day relative returns align with patterns typical of the five most common regime clusters, which account for around 80% of market observations. Sector performance over the past 22 days has mirrored trends consistent with the “Growth Shock” scenario.

The “Goldilocks” correlation has also strengthened, nearing its highest level. Recent market activity has seen Consumer Discretionary outperform while Energy underperformed significantly, contributing to the dominant “Growth Shock” correlation. The “Goldilocks” regime, typically favourable for Technology, has maintained a strong correlation as the sector continues to lead the market.

Hedge funds have turned bullish on the dollar-yen, with many rushing into positions that expect the currency pair to rise by as much as 5% in the coming months, according to a report by Bloomberg UK.

Following hawkish interest rate decisions from the Federal Reserve and dovish moves from the Bank of Japan last week, hedge funds have heavily bought into dollar-yen options, betting on the pair’s strength.

These central bank actions have led to a more pessimistic outlook for the yen, with market sentiment shifting in favour of the dollar.

On 19 December, trading volume in the dollar-yen currency pair surged to over $23bn on The Depository Trust & Clearing Corporation, eclipsing the previous monthly high of about $15bn. As of 2:19 PM Tokyo time, dollar-yen was the most actively traded currency pair on DTCC options.

Mukund Daga, the head of FX options for Asia at Barclays Bank in Singapore, stated, “We have seen hedge funds buying outright USD/JPY calls or digital with a view of the currency pair rising to 160-165 range despite warnings by Japan’s finance minister and the Ministry of Finance.” At that time, dollar-yen was trading at 156.61, down 0.2% from Friday’s close of 156.31.

Traders noted that many of these bullish options had expirations tied to the upcoming interest rate decisions by both central banks in January. On 19 December, the premium to hedge against the downside of the currency pair, compared to the upside, saw its largest drop in three months, driven by increased demand for call options. Both Asian and European hedge funds were particularly active in these bullish trades.

Sagar Sambrani, an FX derivatives trader at Nomura International in London, explained, “USD/JPY topside has seen renewed interest for Q1 ’25 on divergence between Fed and BOJ expectations and is supported by the broader dollar strength, and these trades have been expressed via outright digitals as well as leveraged structures which are plays on moderation in spot momentum as it approaches the key level of 160.”

After breaking its November peak, the dollar-yen rose to a five-month high last week, opening the possibility for further gains. However, funds remain cautious about the potential for intervention from Japanese authorities if the yen continues to weaken.

On Friday, Japan intensified its warnings against currency speculation amid the yen’s slide.

“The government’s deeply concerned about recent currency moves, including those driven by speculators,” Japanese Finance Minister Katsunobu Kato said. “We will take appropriate action if there are excessive moves in the currency market.”

Hedge funds and money managers have flocked to Argentine markets in 2024, betting on President Javier Milei to breathe new life into the country’s ailing economy, according to a report by Wall Street journal.

And it seems his leadership has already paid off, with Buenos Aires stocks on track to be the best performers globally this year, while government bond prices have surged. An exchange-traded fund tracking the MSCI Argentina index has jumped over 60%.

Milei, a libertarian outsider who won the presidency by promising deep spending cuts, famously used a chainsaw during his campaign to symbolise his commitment to economic reform. Since taking office in December 2023, he has enacted a series of sweeping measures, including halting public works, slashing transfers to provinces, and cutting utility subsidies. He has also narrowed the gap between official and black-market exchange rates.

These radical changes have caused significant economic hardship, exacerbating Argentina’s already high poverty levels. However, inflation has drastically slowed, and for the first time in more than a decade, Argentina has reported a quarterly fiscal surplus. Recent data shows the economy emerging from recession, growing by 3.9% in the third quarter of 2024 compared to the previous quarter.

This shift has prompted a dramatic change in investor sentiment toward a country long beset by political instability, rampant inflation, and excessive government spending. Argentina has defaulted on its sovereign debt nine times since its independence in 1816, most recently in 2020.

Genna Lozovsky, Chief Investment Officer at Sandglass Capital Advisors, a London-based hedge fund, called the turnaround “breathtaking,” saying bondholders could see significant gains if Milei’s fiscal policies hold and inflation continues to slow.

Argentina’s bonds have already surged. The ICE BofA US Dollar Argentina Sovereign Index, which tracks the nation’s hard-currency debt, has posted a total return of around 90% in 2024.

Meanwhile, the S&P Merval Index, which tracks Argentine stocks, has skyrocketed more than 160% this year, far outpacing global stock benchmarks. Even after adjusting for currency fluctuations, the index is still up more than 100% in US dollar terms – compared to the S&P500’s 25% gain during the same period.

Investment firms focusing on emerging markets and distressed debt have been key beneficiaries of this rally.

“Argentina was one of our biggest winners this year,” said Aaron Stern, Chief Investment Officer of Converium Capital, a multistrategy hedge-fund firm in Montreal overseeing $500m. “Generally, I don’t like saying ‘this time is different,’ but I think the backdrop globally and domestically is more favourable than it’s been in recent history for Argentina.”

Converium began buying Argentine sovereign bonds after its launch in 2021, capitalising on low prices following a 2020 restructuring. Stern saw little downside, given the low prices and the fact that the government wasn’t facing imminent debt repayments. Meanwhile, any improvement in Argentina’s situation could result in significant gains.

At Shiprock, a hedge fund focused on distressed and special situations, nearly $800m in assets have been bolstered by Argentine debt holdings, which have contributed to a 34% gain through November 2024, according to sources familiar with the firm’s performance. The firm has invested in sovereign, corporate, and Buenos Aires provincial debt.

However, some investors remain cautious due to Argentina’s struggle to rebuild its foreign-exchange reserves. The country faces a multibillion-dollar shortfall in hard currency, raising concerns about its ability to meet bondholder obligations.

Alessandra Alecci, a debt fund manager for Carmignac, a French asset manager, has voiced concerns about the reserve shortfall, estimating it to be around $8bn. Nevertheless, she acknowledged that it’s hard to remain pessimistic about Milei’s economic reforms given their ongoing success.

To strengthen the country’s financial position, Milei has pursued a new loan from the International Monetary Fund (IMF), enabling his government to lift the strict currency controls that have stifled business activity for years.
Some investors are optimistic that Milei’s growing relationships with figures like Donald Trump and Elon Musk could help Argentina secure a deal with the Washington-based IMF. An IMF spokeswoman confirmed this month that negotiations with Argentina are ongoing.

Carmignac, the French investment firm, started cautiously investing in Argentina last fall as Milei gained traction in the polls. The firm now holds a larger stake in Argentine sovereign debt, along with approximately $200m in Argentine stocks.

Carmignac’s portfolio managers are optimistic about Argentina’s economic prospects, a sentiment that was further bolstered after a small team, including co-founder Edouard Carmignac, met with Milei in Argentina last month.

As the festive trading period draws to a close, investor focus has turned to the highly anticipated retail performance updates in early January, with hedge funds eyeing the retail sector for potential profits after warnings of “disastrous” pre-Christmas trading conditions, according to a report by the Financial Times. 

Prominent UK retailers have faced pressure from short-sellers, including Kingfisher, owner of B&Q and Screwfix; Burberry, the British luxury brand recently removed from the blue-chip index; and online fashion retailer Boohoo. 

Short bets have also targeted J Sainsbury, the UK’s second-largest supermarket chain, and Pets at Home, a leading pet and veterinary retailer, according to filings with the Financial Conduct Authority.

Despite early Black Friday discounts, official data has reportedly revealed UK retail sales in November failed to meet expectations. The latest CBI distributive trades survey, which mainly tracks large high-street retailers, reported only a slight improvement in retail sales balance from -18 in November to -15 in December, with sales volumes described as “poor” for the season.

Footfall data also paints a bleak picture: shopper visits to retail stores were down 11.4% compared to the previous year during the final week before Christmas, according to Rendle Intelligence and Insights.

Post-Christmas trading updates are set to begin with Next, often regarded as a high street bellwether, on 6 January. Subsequent updates from retailers such as B&M, Marks & Spencer, JD Sports, Currys, and Dunelm will offer further insight into the sector’s health.

Meanwhile, the British Retail Consortium (BRC) has warned of an impending “spending squeeze” in January. 

Confidence in the UK economy took a significant hit in December, with BRC-Opinium data showing an eight-point drop to -27. Public spending intentions also fell by six points, with declines projected across nearly all retail categories.

Helen Dickinson, BRC’s chief executive, cautioned that retailers face difficult choices amid stagnating sales growth. “Retailers will have no choice but to raise prices or cut costs –  closing stores and freezing recruitment,” she warned.

Investment advisers are expected to surpass hedge funds as the largest holders of US-listed spot bitcoin (BTC) exchange-traded funds (ETFs) in 2025, according to a report by CoinDesk citing CF Benchmarks.

Since their launch on 11 January 2024, a total of 11 spot BTC ETFs have given investors a way to gain exposure to bitcoin without directly owning or storing it, and have already attracted over $36bn in investments.

Currently, hedge funds dominate the market, holding 45.3% of the total ETF assets, while investment advisers, who manage retail and high-net-worth capital, are in second place with 28%.

However, CF Benchmarks predicts this will change in 2025, forecasting that investment advisers will control more than 50% of both the BTC and ether (ETH) ETF markets. CF Benchmarks, a UK-regulated index provider responsible for key digital asset benchmarks like the BRRNY, says this shift will be driven by growing demand from clients, a deeper understanding of digital assets, and the maturation of these investment products.

“We expect investment advisor allocations to rise beyond 50% for both assets, as the $88tn US wealth management industry begins to embrace these vehicles, eclipsing 2024’s combined record-breaking $40bn in net flows,” CF Benchmarks’ said in an annual report cited by CoinDesk.

Investment advisers are already the leading players in the ether ETF market and are likely to extend this dominance in 2025.

Ethereum, the blockchain behind ether, is expected to benefit from the rising popularity of asset tokenisation, while solana may continue to gain ground due to potential regulatory clarity in the US.

The report also forecasts that the tokenisation of real-world assets (RWAs) will gain momentum, potentially surpassing $30bn by 2025. In the stablecoin market, new entrants such as Ripple’s RLUSD and Paxos’ USDG are predicted to challenge Tether’s USDT, which has seen its market share grow from 50% to 70%.

Furthermore, the scalability of blockchain networks will face increasing pressure as active user adoption rises, especially under the expected regulatory clarity from President-elect Donald Trump’s administration. The report suggests that blockchain capacity could need to double to more than 1,600 transactions per second (TPS) to keep up with demand.

Finally, the report anticipates that the Federal Reserve will adopt a dovish stance, potentially utilising measures like yield curve control or expanded asset purchases to address the rising debt burden and weak labour market.

This could repotedly elevate inflation expectations and drive greater interest in hard assets like Bitcoin as a hedge against monetary debasement.

Action is needed to address the systemic barriers that crypto-focused hedge fund managers face in accessing crucial banking services, according to the Alternative Investment Management Association (AIMA), a global organisation representing the alternative investment industry.

These obstacles, detailed in AIMA’s latest report, The Debanking Dilemma, threaten to hinder innovation and undermine the competitiveness of the US digital assets sector, a recent press release outlines.

AIMA’s research, based on a comprehensive survey of 160 crypto hedge fund firms, along with 20 traditional alternative investment managers and 40 crypto technology firms, reveal a stark disparity.

While none of the traditional alternative investment managers reported losing or being denied banking services, 75% of crypto hedge fund firms indicated difficulties in accessing or expanding banking services for their funds, and 67% faced similar challenges for their investment management operations.

This gap in access to basic cash management services raises significant concerns about financial inclusivity.

Key findings from AIMA’s survey, include:

• High rejection rates – 75% of crypto hedge fund firms faced issues accessing or growing banking services for their funds, while 67% encountered similar problems for their investment managers. In contrast, none of the traditional alternative investment managers surveyed faced such challenges.
• Unexplained denials – 98% of crypto hedge fund firms that were notified of potential termination of their banking relationships received no clear explanation for the decision.
• Broader impacts – The debanking of crypto firms adversely affects operational efficiency, investor confidence, and talent acquisition. The widespread nature of this issue, often referred to as “Operation Choke Point 2.0,” has broader consequences for the US’s reputation as a leader in financial innovation and open markets.

Chris Hohn, founder of TCI Fund Management, saw a significant pay cut of £233m this year despite his hedge fund donating around £340m to charitable causes, according to a report by MSN.

According to filings with Companies House, Hohn’s earnings dropped to $53m (£42m), down from the $346m (£276m) he received in 2023.

TCI, which counted former UK Prime Minister Rishi Sunak on its team from 2006 to 2009, was founded in 2003 with a philanthropic mission in mind.

Initially, a portion of the hedge fund’s profits was directed toward the Children’s Investment Fund Foundation, a charity set up by Hohn and his ex-wife. Although TCI ended its formal relationship with the foundation in 2014, it has continued to donate to the organisation, which focuses on issues like HIV prevention and child malnutrition.

Hohn’s pay was notably high in 2022, reaching a record-breaking £575m, the largest sum ever given to an individual in the UK. However, in 2024, TCI’s charitable giving increased significantly, with the hedge fund donating $427m – more than five times the previous year’s contributions.

TCI, which manages $57bn (£45bn) in assets, posted an operating profit of $229m (£182m) this year, a decrease from $456m (£362m) in 2023.

The hedge fund also paid $57m (£45m) in corporate tax despite having just six employees. Known for its aggressive activist investing, TCI has built stakes in major US companies such as Alphabet and Microsoft.

In 2023, Hohn was recognised as “the UK’s most generous man” by The Sunday Times Rich List, having donated over $4bn to charity over his lifetime.

He is also the largest individual donor to the climate change protest group Extinction Rebellion.

Reflecting on his support for the group, Hohn said in 2019: “I recently gave them £50,000 because humanity is aggressively destroying the world with climate change, and there is an urgent need for us all to wake up to this fact.”

Hedge fund redemptions remain low but could increase next year, as shown by SS&C GlobeOp’s Forward Redemption Indicator for December which reached 3.54%, up from 2.91% in November.

“The figure was lower than the 10-year average of 4.27% for the period, as investors assessed market opportunities and refined asset allocations for the upcoming year,” said Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies, in a recent press release.

“Following robust equity market performance over the past two years, signs indicate potential headwinds for economic conditions and return expectations. This shifting landscape provides fertile ground for compelling hedge fund risk-adjusted returns, and we anticipate strong asset retention heading into 2025.”

The SS&C GlobeOp Forward Redemption Indicator is calculated by dividing the total amount of forward redemption notices received from investors in hedge funds administered by SS&C GlobeOp by the assets under administration (AuA) at the start of the month for funds on the SS&C GlobeOp platform.

The indicator has notably declined from its peak of 19.27% in November 2008. The next update of the indicator will be released on January 23, 2024.

Sydney-based Tribeca Investment Partners and Florida’s Segra Capital Management are among several hedge fund managers raising concerns about the overvaluation of nuclear power stocks and reducing their exposure following an exceptional rally this year, according to a report by Bloomberg UK.

“The concern I have is some of this stuff has rallied hard,” said Guy Keller, a Tribeca Portfolio Manager who oversees its long/short Nuclear Energy Opportunities Strategy. As a result, it makes sense to “bring my risk down.”
However, in an interview, he said he would never take a short position, as a single data-centre announcement could lead to significant losses.

Nuclear power investing emerged as a major trend in 2024, with the growth of artificial intelligence and the massive data centres required to support it, tying the future of nuclear energy to the expansion of Big Tech.

Additionally, many green-minded investors have begun to view nuclear energy as a vital element of the low-carbon energy transition.

Among the stocks reportedly benefiting from this surge are Constellation Energy, whose shares have nearly doubled due to the revival of its Three Mile Island nuclear plant, and NuScale Power, whose stock skyrocketed by more than 800% before peaking in late November.

Lisa Audet, founder and chief investment officer of Connecticut’s Tall Trees Capital Management, remains “cautious” about small modular reactor (SMR) companies like Oklo and NuScale, even after their stock prices have corrected – SMRs are designed to be quicker and more cost-effective to deploy than traditional large-scale plants, but the technology is not anticipated to come online until the 2030s.

According to IHS Markit data, short interest as a percentage of shares outstanding is about 17% for Oklo and nearly 15% for NuScale, compared to less than 1% for Constellation Energy.

The broader sentiment on Wall Street towards nuclear power is also becoming more cautious.

In October, a team of analysts at JPMorgan Chase published a 63-page report warning of the overhyped nature of nuclear stocks, coining the term “NucleHype” to capture the current fervour. The report highlighted “inherent challenges” in the sector, such as uranium supply-chain constraints and the lengthy timeline for developing nuclear power.

Some hedge fund managers are finding opportunities in other parts of the value chain.

Arthur Hyde, a portfolio manager at Segra Capital, which manages $600m in assets mainly focused on nuclear and uranium, reportedly noted that a “fragile and fragmented” uranium supply chain should create upward pressure on prices in 2025.

Uranium prices have dropped about a third from their February peak, leading to a more modest 1.4% increase in the $3.4bn Global X Uranium ETF this year, compared to nearly 38% in 2023. Some mining companies are now considered oversold, according to Hyde.

However, nuclear technology valuations remain “relatively lofty,” and it will take substantial positive news to maintain these valuations heading into the new year, Hyde said.

As a result, Segra Capital has scaled back its holdings in US utilities and technology companies in the fourth quarter and increased its exposure to uranium producers and developers in the US, Canada, and Australia.

Keller from Tribeca said most of his fund is currently focused on uranium assets, partly based on a bet that Big Tech will soon expand its investments into the supply chains required for nuclear plants.

Both Segra Capital and Tribeca, which collectively hold over AUD200m ($127m) in the nuclear and uranium sector, remain optimistic about the incoming Trump administration’s stance on nuclear energy.
“I’m fairly confident that the Trump administration will be—and is—pro-nuclear,” Keller said.

Hedge funds have sharply increased their bullish positions on US crude oil, driven by the potential for sanctions on Iranian and Russian oil, as well as the likelihood of additional economic stimulus from China, according to a report by BNN Bloomberg.

According to the Commodity Futures Trading Commission, money managers raised their net-long position on West Texas Intermediate (WTI) by 57,215 contracts, bringing the total to 161,201 contracts for the week ending December 17. This is the biggest increase since September 2023.

This shift in sentiment followed a rise in oil prices, fuelled by the expectation of sanctions that could tighten supplies of Russian and Iranian oil, counterbalancing predictions of a supply surplus in 2025. On the demand side, stronger-than-expected stimulus measures from China enhanced the outlook for the world’s largest crude importer.

The surge in WTI long positions, reaching their highest level in about four months, has brought hedge funds’ stance on the US benchmark closer to that of Brent crude, which saw its own bullish positioning rise to 184,841 contracts.

PARTNER CONTENT

Anson Investments Master Fund (AIMF), the flagship fund managed by Anson Funds, was voted by Hedgeweek readers as Overall Multi-Strategy Fund of the Year at the 2024 Hedgeweek Americas Awards. Chief Investment Officer Moez Kassam outlines the firm’s flexible approach to investment and risk management allow it to protect and grow investor capital… 

Investment approach 

Anson aims to generate absolute returns with low downside volatility and low correlation to broad equity markets. “Our philosophy centers on minimizing exposure to market or geopolitical shocks,” says Moez Kassam, Chief Investment Officer of Anson Funds. “We aim to generate returns predominantly through astute security selection.” 

The firm deploys capital to strategies that use a consistent approach to security selection, while retaining funds to capitalize on short-term opportunities. “We maintain a flexible approach, constantly evaluating market sentiment and seizing the most compelling opportunities,” Kassam explains. “Our extensive experience enables us to discern true signals from market noise. By dedicating significant resources to research and data analysis, we gain a deep understanding of market dynamics. This allows us to adapt our investment strategy swiftly and decisively.” 

Risk management 

Anson Funds prioritizes disciplined risk management to protect investor capital. “Preserving investor capital is our paramount concern,” Kassam emphasizes. “While aggressive strategies might yield short-term gains, they ultimately jeopardize long-term stability.” This includes managing leverage, minimizing concentration by considering both obvious and hidden correlations, and optimizing trade timing by gradually increasing position sizes to account for market fluctuations. 

“In favorable market conditions, we often identify numerous promising issuers,” says Kassam. “By focusing on the highest-conviction opportunities, we can enhance returns without resorting to excessive leverage.” 

“Market turbulence often reveals unexpected correlations across seemingly unrelated assets,” he adds. “Our concentration limits consider not only obvious relationships but also those hidden links that surface during periods of stress.” 

“Experience has taught us that markets can defy logic for extended periods,” Kassam notes. “By scaling into positions gradually, we retain the flexibility to navigate market volatility and capitalize on emerging trends.” 

Looking ahead 

Anson Funds believes that by allocating capital across time-tested strategies while staying true to its core investment principles, it can continue to protect and grow investor capital. “We maintain a market-agnostic approach, deploying capital across proven strategies that align with our core strengths,” Kassam concludes. “This disciplined approach, we believe, will enable us to consistently protect and grow investor capital.” 

Moez Kassam is a hedge fund manager, venture capitalist and entrepreneur. As Co-Founder and Chief Investment Officer of Anson Funds, he presides over $2bn in assets with exceptional results, regularly earning him a spot among the globe’s top performers by both Bloomberg and Barron’s magazines.   

An active philanthropist, Moez sits on the boards of the Toronto Library Foundation, the Canadian Olympic Foundation and Ryerson University’s Technology Innovation Circle. The Moez & Marissa Kassam Foundation — dedicated to strengthening the health and vibrancy of vulnerable communities — is a regular benefactor of Doctors Without Borders, Toronto Foundation for Student Success and Camp Oochigeas, a summer camp providing memorable experiences for children affected by cancer. The Foundation’s generous contribution to Michael Garron Hospital is commemorated by the state-of-the-art Moez & Marissa Kassam Food Court, designed to nourish a burgeoning community of underserved patients, frontline workers, and medical staff.   

Moez is an active member of the Young Presidents Organization and, in 2018, was honored to be counted among Canada’s Top 40 Under 40. He holds an MBA from London Business School and a BA from Western University. He resides in Toronto, Canada.  

Pershing Square Holdings, a £11.9bn investment trust managed by Bill Ackman, has doubled its share buyback programme to $200m (£159m) as it seeks to address a persistent 34% discount on its shares, according to a report by Citywire. 

The trust announced that a second programme of equal size will follow once its current $100m buyback programme is completed. 

‘The larger size of the programme is intended to reduce the risk that it is exhausted during a period when there are trading window restrictions on new authorisations,’ the closed-end fund said in a stock exchange notice, with the buybacks aiming to increase net asset value (NAV) per share while reducing the fund’s capital.

Since launching the current buyback programme on 27 November, the FTSE 100-listed trust has spent $29.3m, bringing its total buybacks since May 2017 to $1.4bn.

Pershing Square had seen its share discount narrow to 20% earlier in 2024 after announcing plans to raise capital for a US-listed closed-end fund, Pershing Square USA, which was expected to generate fee-sharing benefits for the trust. 

However, after shelving those plans in July and experiencing a period of underperformance against the S&P 500 benchmark, the discount widened again. Returns were particularly affected by the underperformance of Universal Music Group, a major holding.

In August, the board reiterated its commitment to monitoring the discount but acknowledged concerns from some investors. Critics have suggested that the increased buyback amount, equivalent to only 1.3% of net assets, may fall short given the trust’s portfolio is concentrated in long positions in liquid, listed companies.

The expanded buyback follows Pershing Square’s decision to delist from Euronext Amsterdam, a cost-saving move designed to focus on the London market.

While the trust delivered positive returns in the first half of 2024, its shares have traded at an average 28% discount over the past year. Shareholders saw gains of 8.4% in sterling terms over the same period, supported by a portfolio of 13 predominantly US stocks.

Top holdings include Alphabet, Brookfield, and Canadian Pacific Kansas City, a railway company connecting Canada, the US, and Mexico. In August, Ackman retained shares in Seaport Entertainment Group, which spun out from Howard Hughes Holdings. Seaport owns New York City real estate and the Las Vegas Aviators, a Minor League Baseball team.

Over the past five years, the trust has delivered shareholder returns of 174%, significantly outpacing the S&P500’s 107%.

Hillhouse Investment Management and CPE, the Chinese firm formerly known as Citic Private Equity, have reportedly held early talks about setting up offices in Abu Dhabi, according to a report by Bloomberg citing sources familiar with the matter.

The city has become a hedge fund hub of late, attracting major firms including Brevan Howard Asset Management and Marshall Wace. A representative from the city’s financial free zone, ADGM, also expects at least two Asian private equity firms to establish a presence there soon.

These developments reportedly highlight a rising interest among Asian investment firms in joining their Western counterparts in the UAE. With its wealthy sovereign wealth funds, tax-free status, and favourable time zone, cities like Abu Dhabi and Dubai are emerging as serious competitors to financial hubs like London and Hong Kong.

And Abu Dhabi’s success isn’t isolated; Dubai is also courting investment firms.

The Dubai Financial Services Authority and the Alternative Investment Management Association recently hosted Chinese wealth and asset management executives, aiming to encourage regional expansion. The hedge fund industry in Dubai has already seen its workforce grow past 1000, bolstered by firms like Millennium Management.

Interest from Chinese companies has surged in 2024, the Dubai International Financial Center (DIFC) reportedly stated, with two major players, Dymon Asia Capital and Asia Research & Capital Management, having opened offices in the emirate.

The UAE’s close ties to China – its largest trading partner since 2020 – also enhance its appeal.

Many Asian firms see the UAE as a gateway to nearby markets such as India. Additionally, the country’s substantial pools of capital make it an attractive destination, with Abu Dhabi housing sovereign wealth funds worth nearly $1.7tn and Dubai’s family offices managing $1.2tn.

Despite these advantages, the emerging hedge fund industry in the UAE faces challenges.

One issue is the limited number of investment opportunities in the Middle East, leading many firms to deploy most of their capital overseas.

Another setback occurred earlier this year when Ray Dalio and Abu Dhabi’s G42 shelved plans for a joint investment venture, a blow for the city given Dalio’s high-profile support for its financial growth.

While the UAE’s appeal grows, much of the hedge fund sector’s infrastructure and workforce remains centred in traditional financial hubs like London and New York.

Citadel CEO Ken Griffin remarked earlier this year that countries with attractive tax regimes may lure senior portfolio managers, but struggle to attract the analysts and associates who support day-to-day operations.

“Having a PM located in a low-tax jurisdiction on Zoom intermittently with a team back in London — that’s not a winning formula,” Griffin noted.

South Korean hedge fund Must Asset Management, which has delivered an impressive 50% return this year – far outpacing the nation’s sluggish stock market – is spotlighting governance issues at mining conglomerate Young Poong over its handling of shareholder returns, according to a Bloomberg report.

Founder Kim Doo-Yong has criticised what he describes as hypocrisy from Young Poong’s leadership, noting that the miner’s president previously condemned Korea Zinc for conducting a share buyback without cancelling the repurchased shares, yet Young Poong has held onto its own uncancelled treasury shares for over a decade.

Kim’s fund owns more than 2% of Young Poong.

“It was a sad moment that laid bare the ‘Korea Discount,’” Kim said in an interview cited by the report, referring to the persistent undervaluation of South Korean stocks. Last month, Must Asset proposed that Young Poong cancel its treasury shares – equal to 6.62% of its outstanding stock – and take additional steps to enhance its valuation.

Young Poong’s shares trade at less than 0.2x their book value, placing the company among the worst performers in the Kospi Mid Cap Index. This stands in stark contrast to its 25% stake in Korea Zinc, which has soared in value amid a hostile takeover bid for control by Young Poong and private equity firm MBK Partners.

As of last Friday, that stake was worth KRW5.2tn ($3.6bn), more than seven times Young Poong’s own market capitalisation.

Ironically, one of the reasons cited by Young Poong and MBK for their bid to take control of Korea Zinc was to address the latter’s corporate governance issues. Kim argued that for Young Poong to retain credibility, it must address its own governance shortcomings, starting with the cancellation of its treasury shares.

A spokesperson for Young Poong said the company is reviewing various shareholder opinions, including those from Must Asset, but has not reached a decision. On 10 December, the company disclosed in a regulatory filing that it would update investors within a month on matters such as treasury share cancellation or a potential stock split.

Must Asset has a history of shareholder activism, including a successful 2020 campaign to push for reform at Taeyoung Engineering & Construction. The effort led to a profitable exit for the fund after Taeyoung restructured by splitting its stock into a holding company.

This year’s remarkable 50% return for Must Asset stems from strategic investments, including early bets on noodle maker Samyang Foods and financial firm Meritz Financial Group. The firm, which manages assets totalling KRW526bn, attributes its success to in-depth research and disciplined strategy.

While South Korea’s “Corporate Value-Up” initiative has had limited impact on the broader market – evidenced by the Kospi’s 8% decline this year compared to a 16% rise in global equities – Kim remains optimistic, seeing growing momentum for shareholder activism as a catalyst for improving corporate governance and boosting valuations.

Silver Point Capital is preparing to challenge a lawsuit filed by the US Securities and Exchange Commission (SEC), which accuses the hedge fund of failing to implement proper policies to prevent a consultant from sharing confidential information about Puerto Rico bonds, according to a report by BNN Bloomberg.

The consultant, a now-deceased attorney, was a member of a creditors’ committee that helped restructure Puerto Rico’s municipal bonds on behalf of Silver Point.

According to the SEC’s complaint, filed in federal court in Connecticut, the attorney had multiple opportunities to pass material nonpublic information to the firm’s trading arm.

The SEC claims Silver Point’s failure to monitor the attorney’s communications created a risk of insider trading.

However, Silver Point has refuted the allegations, stating that a four-year investigation and a review of approximately 350,000 documents revealed no evidence of the attorney sharing confidential information or the firm engaging in illegal trading activities.

“We have refused to settle a matter in which there was neither any wrongdoing nor any deficiency in our information barrier policies or our compliance program,” the firm said in the statement. “Silver Point has, at all times, behaved legally and ethically.”

The case stems from Puerto Rico’s 2015 economic collapse, which led the territory to default on much of its debt. The attorney was involved in the creditors’ committee from September 2019 to February 2020, during which time he had numerous communications with Silver Point’s public trading desk without consulting the firm’s compliance team.

The SEC alleges that Silver Point purchased $260m in Puerto Rico bonds during this period, creating a “substantial risk” that nonpublic information was used in trading decisions. The firm reportedly generated over $29m in profits from these trades.

Allowing individuals with material nonpublic information “unfettered access to those making trading decisions presents an enhanced risk of misuse,” Sanjay Wadhwa, Acting Director of the SEC’s enforcement division, said in a statement cited by the report.

“The resulting risks to market integrity and investors are compounded when investment advisers fail to enforce their compliance policies and procedures.”

Billionaire investor Daniel Loeb’s hedge fund, Third Point, plans to acquire fund manager AS Birch Grove in a strategic move to enhance its credit investment capabilities, according to a report by Reuters.

The acquisition comes as investors increasingly seek diversified portfolio options.

Third Point, which manages approximately $12bn in assets, employs a variety of strategies, including equities, venture capital, and activist investments. The firm entered the credit market in 2020 with the launch of dedicated credit funds.

By acquiring Birch Grove, which oversees $8bn in assets, Third Point aims to “better serve its investors across all asset classes,” the report says citing a press release issued Friday. The firm also plans to develop new investment products as part of the expansion.

Third Point has achieved double-digit returns in 2023, a marked improvement from more modest gains of around 4% in 2022 and a 22% loss in 2021.

Founded in 2013 by Jonathan Berger and Andrew Fink, Birch Grove specialises in credit-focused strategies, including collateralised loan obligations (CLOs), senior loans, and high-yield bonds.

Following the deal’s expected closure in the first quarter of 2025, Birch Grove will operate as a subsidiary of Third Point. American Securities, which partnered in the creation of Birch Grove in 2021, will relinquish its ownership stake.

While financial terms were not disclosed, the leadership structure post-acquisition will see Jonathan Berger serve as Co-Head of Credit at Third Point alongside Ian Wallace, a Partner at the firm. Birch Grove’s existing funds will remain separately managed.

Technology firm Ocado was the most shorted company on the UK stock market as of 16 December, 2024, according to a recent report from GraniteShares, a global issuer of Exchange Traded Products (ETPs) with over $9bn AUM.

Ocado, which provides comprehensive online grocery fulfilment solutions, saw 5.67% of its shares shorted by five fund managers, with D1 Capital Partners holding the largest stake at 2.18%.

In second place was Petrofac, an international energy services company, with 5.73% of its stock shorted by two investment firms.

Following Petrofac were John Wood Group and Alphawave IP Group, which had 5.21% and 5.19% of their shares shorted by three and six fund managers, respectively.

The analysis also revealed that GLG Partners held the largest number of short positions on UK-listed companies, with 42 active short positions. It was followed by Marshall Wace and Qube Research & Technologies, with 28 and 24 active short positions, respectively.

Activist investor Palliser Capital, along with more than 100 other shareholders, has called for a resolution to review Rio Tinto’s dual-listed structure, aiming to unify the miner’s corporate framework, according to a report by Reuters.

Earlier this month, Palliser urged Rio Tinto to abandon its primary London listing and consolidate its corporate structure in Australia, arguing that the current dual-listed model has already cost shareholders around $50bn in lost value.

On Thursday, Palliser reportedly informed Rio Tinto’s board of its intention to present the resolution at the company’s upcoming annual general meeting on 16 January. The resolution seeks to provide shareholders with independent information and evaluate the existing ownership structure, assessing whether it is more advantageous to keep the current model or unify the company.

Palliser’s initial push to consolidate Rio Tinto’s dual-listed setup received backing from stakeholders, analysts, and investors in both Australia and the UK.

Citing an earlier letter, the report says Palliser questioned the need for maintaining the UK-listed entity, Rio Tinto, and its structural hierarchy. The letter raised concerns about the entity’s inability to independently support dividends, its minimal workforce in the UK, its limited contribution to the group’s EBITDA, and the significant trading discount compared to the Australian-listed Rio Tinto.

“In our view, it is, in fact, incumbent on management to now fully and transparently justify to the investor community exactly why Rio Tinto is immune from all of the globally-accepted inefficiencies of a DLC (dual listed company) structure,” Palliser Capital said.

With the political and economic shifts under US President-elect Donald Trump expected to dominate the global financial landscape in 2025 and beyond, macro hedge fund strategies have emerged as the preferred choice for many investors, according to a report by Reuters.

This year, hedge funds capitalised on volatile markets driven by major political events, such as November’s US election, and shifts in monetary policy, including the Bank of Japan’s interest rate hikes. Many investors believe the coming year could bring even greater turbulence, according to hedge fund managers and recent survey data.

“Macro strategies are particularly compelling right now due to the uncertain political backdrop and its implications for both fiscal and monetary policy,” said Craig Bergstrom, Chief Investment Officer at Corbin Capital Partners.

The incoming Trump administration’s proposed tariff increases could ripple through the global economy, potentially weakening the Chinese yuan and the euro while exacerbating inflationary pressures. Such dynamics might limit the Federal Reserve’s ability to reduce interest rates, further amplifying market uncertainty.

While cryptocurrency-focused hedge funds outperformed other strategies in 2024, with Preqin reporting an impressive 24.5% annualised return, investor confidence in their prospects for 2025 appears to be waning.

In a November survey of 239 investment firms conducted by Societe Generale, macro strategies topped the list of preferred hedge fund approaches, while crypto ranked at the bottom.

Nearly 40% of respondents expressed plans to allocate funds to macro strategies, the report says. However, interest in government bond trading has declined, with commodities and equities-focused funds taking the second and third spots in popularity.

Jordan Brooks, Co-Head of the Macro Strategies Group at AQR, noted that sovereign bonds are losing prominence.
“Inflation is now more balanced. From here, we think things are less certain across the board,” said Brooks, highlighting currency markets, which trade $7.5tn daily, as a critical area of interest.

Despite Trump’s pro-crypto stance, including promises of favourable regulations and Bitcoin accumulation, institutional investors remain cautious.

“We haven’t seen a lot of institutional investor demand on the solutions side for crypto trading strategies,” said Carol Ward, Man Group’s Head of Solutions.

In Asia, some hedge funds have dipped into crypto investing, but results have been minimal, said Benjamin Low, a Senior Investment Director at Cambridge Associates. While crypto could offer diversification benefits, its extreme volatility and broad definition raise concerns among investors.

However, attitudes are gradually evolving. Many hedge funds have updated their policies to allow for crypto exposure, said Edo Rulli, Chief Investment Officer of Hedge Fund Solutions at UBS Asset Management. Still, large-scale investments in crypto by non-specialist funds remain rare due to regulatory, reputational, and fraud risks.

Some specialised funds have thrived in the crypto space. Hong Kong-based NextGen Digital Venture reported a 116% gain through November, driven by stocks like Coinbase, MicroStrategy, and Marathon Digital Holdings. Founder Jason Huang is optimistic about launching a second crypto fund but warns of potential market peaks for Bitcoin in 2025.

Meanwhile, hedge funds, including Millennium Management, Capula Management, and Tudor Investment, boosted their exposure to the US bitcoin ETFs in Q3. Multi-strategy funds have also invested in convertible bonds of MicroStrategy, whose bitcoin holdings propelled its shares to a nearly 500% increase this year.

SkyBridge founder Anthony Scaramucci remains cautious about the widespread institutional adoption of crypto. “We’re creating now a regulatory runway. Big institutions, endowments, big enterprises, they don’t want to get fired. They’re sitting on top of piles of money, and it’s their job to take measured risk,” he said.