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Citadel has hired a second London-based Portfolio Manager from rival Elliott Investment Management, signalling its potential shift towards adopting activist strategies, according to a report by the Financial Times.

Pawel Serej, who left Elliott in the summer, is set to join Citadel’s London team as an Event-Driven Portfolio Manager, with a focus on risk arbitrage, a strategy that involves betting on the successful completion of mergers and acquisitions.

Citadel declined to comment on the hire.

According to the report, this move follows news that Nabeel Bhanji, a senior portfolio manager and equity partner at Elliott, was appointed to a global leadership and investment role at Citadel last month.

Despite their shared background, Serej’s departure from Elliott occurred months before Bhanji’s, and the hires are unrelated, according to sources familiar with the matter. Serej is expected to begin at Citadel in mid-2025 after serving a 12-month gardening leave.

While Citadel has not traditionally been recognised for engaging in activist investing, the report says the addition of Bhanji and Serej hints that it may be looking to integrate activist strategies into its approach. The two had collaborated closely on several of Elliott’s high-profile activist campaigns, including those involving SoftBank, Swedish Match, and Toshiba. Other Elliot campaigns include major US companies such as Honeywell, Starbucks, and Southwest Airlines.

Citadel, founded in 1990, is now the most profitable hedge fund in the $4.5tn industry, with its flagship Wellington fund posting a 13.2% gain between January and November, according to investors. The firm manages $65bn in assets across various strategies, including commodities, credit, equities, and quantitative trading.

Elliott, based in Florida with a significant London office led by Gordon Singer, the son of founder Paul Singer, manages $70bn in assets. Bhanji and Serej are among several senior departures from Elliott’s London office in recent years.

The University of Connecticut’s (UConn) endowment is moving away from hedge funds in favour of a more cost-efficient strategy involving buffer ETFs to manage risk in its $634m portfolio, according to a recent report by BNN Bloomberg.

The report, citing David Ford, chairman of UConn’s investment committee, notes that the university sold off nearly all its hedge fund investments during the most recent fiscal year and shifted to buffer ETFs, which have attracted over $58bn in assets in just three years.

Ford describes buffer ETFs as a simpler, less expensive alternative to traditional hedge funds, offering the added advantage of greater liquidity.

While hedge funds traditionally charge fees of 2% of assets and 20% of profits, buffer ETFs average a fee of just 0.8%, the report says. Many of these ETFs track major stock indexes, such as the S&P 500, providing downside protection while capping gains over set periods, typically one or two years.

Despite scaling back its hedge fund exposure, UConn retains investments with two long-only equity managers. In the fiscal year ending 30 June, UConn’s endowment posted a 12.1% return, slightly underperforming the 13.5% gain achieved by Innovator’s largest buffer ETF, the US Equity Power Buffer ETF.

Speculators are increasingly optimistic about gasoline futures, reaching their most bullish stance in eight months amid low prices and looming concerns about supply constraints next year, Bloomberg reports.

According to data from Commodity Futures Trading Commission (CFTC), the report finds money managers’ net-long positions on gasoline climbed by 6,546 lots to 73,037 in the week ending 10 December.

This marks the highest bullish sentiment since mid-April.

Front-month gasoline futures are currently trading around $1.99 per gallon, reflecting a 5% decline for the year, potentially presenting a buying opportunity for traders.

Market participants appear to be positioning for higher prices in 2024 due to planned refinery outages and closures that could tighten fuel supplies. Notably, LyondellBasell’s Houston refinery, which processes approximately 264,000 barrels per day, is slated to close by the end of the first quarter.

Adding to supply concerns, US government data revealed that gasoline inventories have fallen to their lowest seasonal levels in three years, further fuelling the shift to a more bullish outlook on the fuel market.

Hedge funds have set a record for short positions on ether futures at the Chicago Mercantile Exchange (CME), with contracts reaching an all-time high of 6,349, reports BeinCrypto, citing a release by Zerohedge.

This bearish stance comes as ether struggles to hold above $4,000, despite over $2bn in recent ETF inflows, including a record $854m weekly influx, according to the report, referencing data from SpotOnChain.

Analysts attribute ether’s lacklustre price performance to the surge in shorts, signalling cautious near-term sentiment.

However, long-term optimism remains.

CryptoQuant data points to ether’s realised price upper band at $5,200 – on par with its 2021 bull run peak – indicating potential for upward movement.

Network activity also reflects strong interest, BeinCrypto finds, with Santiment reporting 130,000 new Ethereum addresses created daily in December, an eight-month high, while IntoTheBlock notes weekly transaction fees hit $67 million – the highest since April – driven by DeFi activity and market adjustments.

Following Hilbert Group AB’s recent acquisition of Liberty Road Capital (LRC), the quant investment firm has now integrated Liberty’s advanced AI technology into its trading and analytics ecosystem, paving the way for new user-centric products on the Coin360 side.

By analysing millions of data points, Liberty AI generates predictive signals and trade ideas and highlights anomalies, with the system able to scan spot, futures, and options markets and and guiding trading teams for execution.

Hilbert Group will also integrate Liberty AI into its Coin360 platform to: provide content tailored to individual user interests, enhancing engagement and retention; generate actionable scoring for any coin, equipping users with invaluable insights for investment decisions.

A future rollout meanwhile, will offer Coin360 users access to an AI-powered trading assistant, mirroring the sophisticated tools used by the firm’s trading teams on the asset management side.

Hilbert is currently exploring the potential of Liberty AI in market-making and other advanced trade-related services.

With hedge funds including Millennium, Citadel, and Balayasny having upped their activity in Europe’s natural gas markets ran by extreme price swings, their growing dominance now risks destabilising the market and potentially triggering a slump, according to a report by Bloomberg.

As 2024 concludes, these funds hold unprecedented volumes of long positions in European gas futures, and while such bets have benefited from volatile conditions, concerns are mounting that their concentration could exacerbate instability.

With market liquidity thinning as year-end approaches, the sheer size of hedge fund wagers looms large. Traders warn that a sudden shift — such as profit-taking or changing fundamentals — could lead to a rapid selloff, intensifying volatility in an already fragile market.

The report quotes Arne Lohmann Rasmussen, Chief Analyst at Global Risk Management, as saying that: “The heavy concentration of positions stresses the market, pushing it to a limit that will eventually break. And it becomes a real risk when everyone wants to get out at the same time.”

Unlike traditional power companies, hedge funds do not buy gas for consumers or sell production from physical assets, making their trades more speculative and less tied to operational needs, which can amplify volatility and cause abrupt price movements.

Hedge funds have reaped massive profits from Europe’s energy volatility, with Millennium earning about $600m from commodities trading in 2023, while Citadel’s commodities division brought in $4bn. Despite these gains, hedge funds’ speculative positioning could backfire if market conditions shift.

Concerns over colder winter forecasts, depleting gas inventories, and delayed liquefied natural gas (LNG) projects have fuelled a bullish outlook for gas prices, but optimism is tempered by factors such as stronger LNG flows and the potential continuation of Russian gas through Ukraine despite the expiry of a transit deal.

If geopolitical risks subside, prices could plummet as risk premiums evaporate. “For now, the market is quite bullish,” said George Cultraro, global head of commodities at Bank of America. “But the most pain is not to the upside. It’s definitely to the downside because of that same positioning, and I don’t think anybody is quite ready to give up on the bull story just yet.”

The Chicago Teachers’ Retirement System (TRS) has announced plans to invest nearly $1bn in hedge funds over the next three years, as part of a bid to address its financial challenges, according to a report by the Chicago Tribune.

The decision comes as the $39bn pension system grapples with only 62% of the funding needed to meet its future obligations and the lingering impact of a kickback scandal.

TRS has decided to allocate 2.5% of its assets to hedge funds, a more conservative approach compared to the 10% recommended by external consultants. “TRS wanted to take it slowly and get its feet wet,” said spokeswoman Eva Golterman, who also highlighted that the system currently has the internal staff needed to manage this allocation.

The investment decision follows a kickback scandal involving former TRS director Stuart Levine, who pled guilty in October to federal charges of accepting millions in bribes in exchange for steering state contracts.

Hedge funds and leveraged investors have scaled back their bearish positions on US five-year Treasury futures, bringing net short positions to their lowest level since July, according to a report by Reuters citing the latest Commodity Futures Trading Commission (CFTC) data.

This shift suggests that market participants are adjusting their positions in anticipation of year-end portfolio rebalancing.

Positioning trends in the Treasury futures market also hint at a decline in the influence of so-called basis trades – arbitrage strategies that exploit the price differences between cash Treasuries and their futures. Based on the latest data, basis trades seem to have been less prominent during the past week.

In the week ending 10 December, leveraged funds reduced their net short positions in five-year Treasury note futures to 2,776,446 contracts, marking the third consecutive week of declines from the record short levels seen on 12 November.

Speculative traders, or non-commercial investors who take positions in futures without underlying business interests, also pared their net short positions in five-year note futures, trimming them to 1,790,430 contracts from 1,861,100 contracts the previous week.

Meanwhile, institutional asset managers reduced their net long positions on five-year Treasury futures to their lowest levels in six weeks. This follows a surge in net longs to record highs about a month ago. Asset managers frequently use long positions in Treasury futures to align portfolios with benchmark indices, leading them to maintain a generally long bias.

Positioning across other Treasury maturities, meanwhile, showed mixed sentiment, with hedge funds increasing their net short positions on two-year futures to 2,473,163 contracts, the highest level since mid-November. Asset managers, however, reduced their net longs to their lowest level since early September, retreating from record highs reached last month.

Ten-Year Futures: Hedge funds slightly increased their net short positions in ten-year futures, while asset managers modestly boosted net long holdings.

By Massimiliano Saccone, CFA, Founder & CEO, XTAL Strategies

For many years, the definition of private market performance seemed inevitably reduced to hazardous time-weighting approximations. The calculation hurdle of the presence of interim cash flows looked insurmountable, so much so that, in the private markets, it became perfectly acceptable to neglect the basic rules of performance analysis and comparison.

Two Seas Capital (Two Seas), an investment management firm that focuses on litigation-driven investments arising from restructurings, bankruptcies, and regulatory events, has appointed Altaf Mackeen as Managing Director and Head of Research, effective 1 January, 2025.

Mackeen brings approximately 20 years of buyside investing experience to Two Seas across multiple asset classes, geographies, and industries. Most recently, he spent nearly a decade as a Senior Portfolio Manager at VR Capital, where he focused on distressed corporate and sovereign credit investments and reorganisations in both North America and emerging markets.

Before his time at VR Capital, Mackeen was a Vice President at Harbinger Capital Partners, specialising in complex turnarounds and special situations. He also covered stressed and high-yield investments at Sankaty Advisors, which is now Bain Capital Credit.

Mackeen has served on multiple boards over his career and prior to his investing career, spent three years at Houlihan Lokey advising companies and creditors involved in insolvency proceedings, out-of- court restructurings, and recapitalisation transactions.

A Danish court has sentenced Briton Sanjay Shah, founder of hedge fund Solo Capital Partners, to 12 years in prison for orchestrating a $1.3bn fraud scheme, marking one of the harshest sentences for tax fraud in the country’s history, according to a report by Reuters.

Shah, 54, was found guilty of defrauding Denmark’s treasury through a ‘cum-ex’ trading scheme between 2012 and 2015.

The Copenhagen court ruled that Shah masterminded the fraudulent operation, which secured DKR9bn ($1.27bn) in dividend tax refunds. Prosecutors alleged that his London-based hedge fund manipulated share transactions to create an illusion of multiple owners, each falsely eligible for tax refunds on dividends.

Despite prosecutors seeking the maximum sentence, Shah, who wore a red Christmas hat during court proceedings, denied wrongdoing. He claimed he exploited a legal loophole and has appealed the verdict to the Danish High Court.

In a TV interview with Danish broadcaster TV2 ahead of the sentencing, Shah admitted to being “a greedy bastard” and likened his scheme to “playing Space Invaders,” where he sought to surpass his previous successes. He acknowledged that the strategy was so lucrative he rewarded himself with a Ferrari and a £19m bonus on his 40th birthday.

Shah’s trading activities have drawn international scrutiny. He is also facing a £1.44bn ($1.83bn) civil tax fraud case in London, with a verdict expected in April.

The case has become a high-profile example of the cum-ex scandal, which has drained billions from public treasuries across Europe since the 2008 financial crisis.

Shah was apprehended in Dubai in 2022 and extradited to Denmark the following year.

Digital asset investment products saw the largest weekly inflows on record last week totalling $3.85bn, smashing the prior record set just a few weeks ago, according to the latest Digital Asset Fund Flows Weekly Report from CoinShares.

Ethereum saw its largest weekly inflows on record of $1.2bn, higher than the ETF launches in July. The inflows came at the expense of Solana which saw $14m outflows.

Blockchain equities, meanwhile, saw inflows of $124m, the largest since January this year.

Fred Desobry, a former portfolio manager at BlueCrest Capital, has joined London-based crypto hedge fund Bastion Asset Management as its Chief Investment Officer as crypto trading continues to gather momentum, according to a report by eFinancial Careers.

Desobry’s appointment strengthens Bastion’s leadership team, which includes Xander Savenberg, a former Citadel quant and fellow BlueCrest alumnus, and Philip Scott, a former partner and COO at Rokos Capital Management.

Since leaving BlueCrest in 2016, Desobry has worked at several firms, most recently serving as CIO at BlueFire AI, a capital markets intelligence firm led by Luke Waddington, ex-global head of BNP Paribas’ electronic markets.

Despite its promising roster, Bastion has struggled to retain key executives. The firm has seen high turnover among its chief technology officers, with Florion Doyon departing for the Abu Dhabi Investment Authority after 18 months, followed by Iain Buchanan, who left for G-Research after just six months. Additionally, Chief Risk Officer Alexandre Loreau exited in June to join Qube Research & Technologies.

by David Moreno, CFA, Indexes Manager, EPRA 

By Steve Novakovic, CAIA, CFA, Managing Director of Educational Programming, CAIA Association