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As global markets face volatility driven by elections, central-bank policy shifts, and geopolitical tensions, hedge funds are increasingly investing in binary options — a high-risk, all-or-nothing strategy offering pre-determined payouts for accurate bets, according to a report by Bloomberg.

While retail traders and systematic funds often favour zero-day-to-expiry options, institutional investors are turning to over-the-counter (OTC) binary contracts – derivatives which are designed to hedge extreme market risks across multiple asset classes, have surged in popularity.

Binary contracts promise a fixed payout if specific conditions are met, but yield nothing if they are not. Critics liken these trades to gambling due to their rigid structure, but proponents argue that they provide a targeted way to achieve returns within strict risk constraints.

While precise market data is hard to gauge due to the OTC nature of these trades, analysts estimate that premiums spent on binary contracts in 2024 range from several hundred million to $1bn.

Major global events have underscored the utility of binary options this year. From US, European, and Indian elections to “live” Federal Reserve meetings, an active Bank of Japan, and escalating geopolitical tensions involving Ukraine, Iran, and Israel, markets have faced continuous disruption.

The US presidential election was particularly influential. While US stocks rallied post-election on optimism about Donald Trump’s market-friendly policies, his administration’s tougher stance on tariffs sparked concerns in Europe and China about potential profit erosion for multinational firms.

“The chase for upside after election uncertainty has driven elevated call skews across US indexes,” said Tanvir Sandhu, chief derivatives strategist at Bloomberg Intelligence. “In Europe, tariff risks have heightened interest in hybrid options, such as those tied to equity and currency movements.

Global hedge funds, including Elliott Investment Management, and private equity firms are zeroing in on Japanese companies, aiming to unlock as much as JPY25tn ($165bn) in undervalued real estate assets, according to a report by Bloomberg.

The potential windfall has fuelled some of the most prominent activist campaigns and private equity deals in Japan this year, marking a shift in how investors perceive corporate Japan’s hidden value.

An accounting practice in Japan records real estate at its historical cost minus depreciation, leaving the true market value of these assets vastly understated on balance sheets. With property prices soaring in metropolitan areas, especially in Tokyo, the potential for unrealised gains has become too enticing for investors to ignore.

Elliott recently disclosed a 5.03% stake in Tokyo Gas, whose real estate holdings, including the iconic Shinjuku Park Tower, are valued on paper at JPY58.9bn. Elliott estimates the market value to exceed PY180bn – almost triple the book value and nearly as much as Tokyo Gas’s market capitalisation.

And the hedge fund is not alone with activist investors like Palliser Capital and Singapore-based 3D Investment Partners leading similar campaigns. This year, 3D pressured Fuji Soft to go private, triggering a bidding war between KKR and Bain Capital. The IT firm’s real estate, valued at JPY84.5bn on its books, could fetch JPY195bn if sold, according to 3D.

Brewer Sapporo Holdings has also attracted attention, with the company earning as much operating income in 2023 from its real estate as it did from selling beer. Meanwhile, Palliser has targeted Tokyo Tatemono, arguing the developer could be worth twice its market value if it streamlined its property holdings.

Even Japan’s train operators, such as Keisei Electric Railway, and Keikyu Corp, have seen activist interest due to their high-value properties near transit hubs.

Private equity firms are also increasingly entering the fray, with KKR, after acquiring Hitachi Transport System in 2023 for JPY670bn, selling warehouses for over JPY200bn. Bain Capital took a similar approach with Showa Aircraft Industry, offloading a golf course for an estimated JPY130bn after its acquisition.

By Max Williams, Co-Founder & COO, Runa Digital Assets

Metalayer, a firm founded by veterans of Two Sigma Ventures – the VC arm of quantitative hedge fund firm Two Sigma, has filed with the Securities and Exchange Commission (SEC) to launch a $25m cryptocurrency investment fund, according to a report by Fortune.

The report cites unnamed sources familiar with the initiative as revealing that Metalayer’s cofounders are Andy Kangpan, Mickey Graham, and David Winton — all of whom previously held senior roles at Two Sigma Ventures.

Metalayer reportedly secured $20m in committed capital during its first close last Friday, with plans to raise the full $25m by year-end. Initial backers include senior executives from Two Sigma Ventures, though Metalayer will operate independently. Additional funding is expected from family offices and executives involved in crypto protocols.

Kangpan was the Digital Asset Lead at Two Sigma Ventures until August 2024, while Mickey Graham served as Vice President of Two Sigma Ventures until 2021 before transitioning to the blockchain project Chainlink. Winton was a VP software engineer at Two Sigma Ventures and later a researcher at Greenoaks, a San Francisco-based venture firm.

With demand for quantitative fixed income traders surging as banks, hedge funds, and market makers vye for recruits from a limited pool of talent, systematic fixed income specialists will be some of the most sought-after in finance, according to a report by eFinancial Careers.

The report cites recruitment experts as predicting a busy year ahead for hiring in this niche with one London-based headhunter noting that fixed income quant traders at banks are increasingly making the jump to trading firms, often with a 20% pay bump to start. Over time, the potential for significantly higher earnings draws top talent to these firms.

“Trading firms don’t need to overpay initially,” the headhunter explains. “Professionals know that success in these roles can lead to substantial compensation down the line.”

Major players like Jane Street and Citadel Securities are spearheading this shift, with the former, a leader in bond ETF market-making for years under Matt Berger, planning to expand its government bond and currency trading operations significantly in 2025, according to the Financial Times.

Citadel Securities, meanwhile, has been building its fixed income team under Shyam Rajan, hiring top talent like Michael De Pass from Bank of America in 2016 and, more recently, Luca Macchiaroli, a former credit quant researcher from BNP Paribas.

Other firms, including XTX Markets, IMC Trading, and Jump Trading, are also ramping up their fixed income capabilities, from currency options to European treasury markets.

Systematic fixed income strategies are gaining momentum at hedge funds, too, according to Russell Clarke of Mantis Partners in London, who attributes the surge to a “post-Covid phenomenon.” Before 2020, there were fewer systematic credit trading candidates, but now funds like AQR Capital Management and DCI, which BlackRock acquired in 2021, have created a skilled talent pool that everyone is chasing.

The Managed Funds Association (MFA) has urged the European Commission (EC) to refrain from applying a one-size-fits-all macro-prudential regulatory framework to nonbank financial intermediaries (NBFIs) in a comment letter submitted this week.

The letter, from the representative body for the alternative investment sector, is in response to the EC’s targeted consultation on macro-prudential policies for NBFIs.

The letter emphasises that the NBFI sector is diverse and encompasses a wide range of financial institutions with varying risk profiles, operational structures, and regulatory oversight.

MFA contends that alternative investment funds (AIFs) and their managers are important and well-regulated, and do not pose a systemic risk to the economy and that considering the diverse nature of the NBFI sector, it would be unsuitable to impose uniform macro-prudential regulations across all NBFIs.

“Alternative investment funds are an important, well-regulated part of Europe’s economy and are not a systemic risk. Imposing a one-size-fits-all regulatory framework on alternative asset managers would restrict their ability to provide capital to European companies, create jobs, and enhance capital markets,” said Bryan Corbett, MFA President and CEO. “Europe should seek to foster investments from alternative investment funds in order to best achieve the Savings and Investments Union objectives, and not burden it with ill-fitting regulations that fail to recognise their distinct characteristics and risk management controls.”

The MFA’s letter outlines the reasons why AIFs should not be subject to macro-prudential regulations similar to those applied to depository institutions, highlighting that appropriate and dynamic risk management is a cornerstone of the alternative investment funds industry.

According to MFA, AIFs are not a systemic risk because they are funded by sophisticated institutional investors who fully understand investment risks. They are not funded by depositors nor backstopped by the government.

In addition, AIFs’ redemption limitations are calibrated to the liquidity of underlying assets, preventing “run risk”, while AIFs also employ limited leverage and maintain detailed, robust margin and risk management practices with their dealer counterparties.

The letter also encourages regulators to harmonise reporting requirements across global markets, which it says would improve the effectiveness of oversight without imposing unnecessary or duplicative reporting burdens on market participants.

Trading Technologies International (TT), a global capital markets technology platform provider, is soon to offer access to Cboe equity index options, providing clients with access to the rapidly growing equity options trading space.

Slated for launch early in 2025, Cboe equity index options on the TT platform will enable the firm’s broad client base of institutional market participants and professional traders to easily take positions in Cboe’s popular index products, including its flagship S&P 500 Index (SPX), Cboe Volatility Index (VIX), Russell 2000 Index (RUT), and Mini SPX (XSP) options contracts.

TT has long offered clients access to Cboe Futures Exchange (CFE) and more recently began providing access to Cboe FX, an over-the-counter market offering trading of spot foreign exchange, spot precious metals, and FX non-deliverable forwards (NDFs).

Pershing Square Capital Management, the hedge fund founded by Bill Ackman, has built a significant $2.6bn stake in Toronto-based Brookfield, making it the second-largest position in the firm’s investment, according to a report by the Globe & Mail.

The billion dollar investment reflects confidence in Brookfield’s role as a key player in managing critical global infrastructure.

Pershing Square began investing in Brookfield, the parent company of Brookfield Asset Management, in April 2024 and by 30 September held 32.7 million shares, representing 2.2% of Brookfield’s outstanding stock. This stake now accounts for 10.6% of Pershing Square’s holdings, surpassing investments in well-known companies such as Hilton Worldwide, Chipotle Mexican Grill, and Alphabet.

Brookfield owns and operates assets central to the global economy, including data centres for AI, renewable energy sources, and logistics infrastructure. Ackman described Brookfield’s portfolio as “the backbone of the global economy.” He predicts the company will benefit from its undervaluation compared to peers and from increasing fee-related earnings at Brookfield Asset Management.

Ackman’s connection to Brookfield dates back over a decade, stemming from collaboration on the restructuring of bankrupt mall owner General Growth Properties — a landmark investment for Pershing Square. Despite occasional disagreements, Ackman expressed respect for Brookfield CEO Bruce Flatt and the management team.

Brookfield’s stock has risen over 40% since Pershing Square began its investment, closing at CAD81.45 on Friday on the Toronto Stock Exchange. Pershing Square partner Charles Korn believes the stock still has substantial growth potential, with shares expected to more than double in the coming years. Ackman noted that Brookfield trades at a valuation multiple of 15 times earnings, compared to competitors like KKR (27 times) and Apollo Global (22 times), indicating significant upside potential.

Brookfield remains underrepresented among US institutional investors, a challenge its management is working to address by recently relocating its head office to New York and focusing on improving liquidity and inclusion in major indexes like the S&P 500.

Ajay Kumar, who previously served as the head of APAC index trading at Goldman Sachs during a decade-long tenure at the investment bank, has secured a new role at the hedge fund ExodusPoint Capital Management in Singapore, according to a report by eFinancial Careers.

Kumar left Goldman in 2020 to take his first hedge fund role, joining Brevan Howard where he spent 16 months before a three-year stint as a Senior Portfolio Manager at Millennium.

Kumar’s move to transition to ExodusPoint comes after a period of gardening leave, suggesting a voluntary departure from Millennium, although the hedge fund has declined to comment on his exit.

ExodusPoint has seen modest returns recently, achieving a 6.4% gain in the year to October 2024, although its October performance was less impressive, with a return of just 0.2%, according to Business Insider.

Global derivatives and securities exchange network Cboe Global Markets, is to launch the first cash-settled index options related to the price of spot bitcoin, beginning Monday, 2 December.

Exclusively listed and traded on Cboe Options Exchange, these options will be SEC-regulated and based on the new Cboe Bitcoin US ETF Index.

The index, jointly developed by Cboe Labs and Cboe Global Indices, is the market’s first US spot Bitcoin ETF index, and is a modified market cap-weighted index designed to track the performance of a basket of spot bitcoin ETFs listed in the US. It is also designed to correlate to the price of spot bitcoin, making it a representative measure of the cryptocurrency.

According to a press statement, options on the Cboe Bitcoin US ETF Index will allow market participants to gain exposure to spot bitcoin ETFs – and indirectly to bitcoin itself – enabling them to capitalise on price movements, manage risk, and express their market views. These index options will be cash-settled, meaning positions are closed in cash at expiration, removing the complexities of physically delivering bitcoin ETFs. In addition to cash settlement, these index options will offer European-style exercise, meaning they are exercisable only on the expiration date, eliminating the risks of early assignment.

Alongside options on the standard-sized index, Cboe plans to offer Cboe Mini Bitcoin US ETF Index options at launch, with a 1/10th notional value of the standard options, offering greater granularity and flexibility in managing basis risk. Cboe also plans to offer cash-settled FLEX options on both the Cboe Bitcoin US ETF Index and the Cboe Mini Bitcoin US ETF Index, allowing traders to customise key contract terms such as exercise price, exercise style, and expiration date – potentially enabling traders to hold larger positions than typically allowed for using standard options contracts.

Cboe’s existing digital assets derivatives offerings already include cash-settled bitcoin and ether margin futures listed and traded on Cboe Digital Exchange that are expected to transition to Cboe Futures Exchange in the first half of 2025, pending regulatory review.

Jason Siegel, the former head of Brookfield Asset Management’s multi-strategy hedge fund platform, has joined BW Gestão de Investimentos (BWGI), the investment office of Brazil’s billionaire Moreira Salles family, according to a report by Bloomberg.

The report cites unnamed sources familiar with the matter as revealing that Siegel will lead a newly formed equity multi-strategy team for BWGI, based in New York.

Joining Siegel are Aaron Hara and Kristin Willoughby, also former Brookfield executives, along with Rob Levites, who previously worked at Weiss Multi-Strategy Advisers. BWGI has reportedly allocated $2bn for the new team’s investment strategy.

BWGI, headquartered in São Paulo, manages approximately $11bn in assets as of its latest annual report in March. The firm oversees the wealth of the Moreira Salles family, whose net worth exceeds $26bn, according to the Bloomberg Billionaires Index. The family’s holdings include major stakes in Itaú Unibanco Holding SA, power company Eneva SA, and niobium producer Cia Brasileira de Metalurgia e Mineração. They have also invested in French firms Elis SA and Verallia SA and manage the Mantiqueira hedge fund.

Global hedge funds accelerated their exit from US electric and water utility stocks last week, marking the fastest pace of sales in two months, while heavily investing in US materials stocks, according to a report by Reuters citing a recent note from the prime brokerage desk at Goldman Sachs.

The note highlights that utilities stocks — excluding gas utilities — are now one of the most sold sectors in November. Despite the Dow Jones Utility Index gaining over 3% last week and climbing more than 20% year-to-date in 2024, hedge funds have been shedding positions across electric and water utilities.

In contrast, US materials stocks emerged as the most net-bought sector on Goldman Sachs’ trading desk last week. The buying spree extended across the sector, with particular focus on chemicals, metals and mining, as well as paper and forest products.

An S&P index tracking materials stocks rose by 1% last week and has gained over 9% in 2024. Hedge funds have consistently shown interest in materials, making it one of the most net-bought sectors in three of the past four weeks, according to Goldman Sachs.

This rotation reflects a shift in hedge fund strategy, as investors reposition portfolios in response to changing market dynamics. Materials stocks, often tied to global growth and industrial demand, may be benefiting from expectations of economic resilience or infrastructure investment. Meanwhile, utilities, traditionally considered defensive assets, could be losing appeal in an environment where risk-on sentiment prevails.

Employee perceptions of diversity and inclusion efforts at hedge funds have dropped to their lowest level in four years, according to a report by Reuters citing Reboot Financial Services’ Race to Equality 2024 report released on Tuesday.

The report, conducted in partnership with research firm Coleman Parkes, highlights a decline in how financial sector employees view workplace actions to improve ethnic and racial diversity.

The report surveyed over 100 hedge fund employees in the United Kingdom, asking them to rate their workplace on various aspects of diversity and inclusion, such as recruitment, culture, leadership, training, and career progression. Hedge funds scored 64.3 out of 100, the lowest among financial sectors including insurance, pensions, asset management, and investment banking.

Insurance companies led the rankings, earning the highest diversity and inclusion scores, with pensions following closely behind. However, wealth management firms also saw employee perceptions decline to their lowest point since 2021.

The findings were part of a broader survey of 800 financial professionals conducted between August and September 2024. Respondents included 700 ethnic minorities and 100 white employees, each with at least 10 years of experience in the finance sector.

While two-thirds of employees reported being encouraged to contribute to building an inclusive workplace, nearly half said they faced pressure against advocating for racial and ethnic equality.

Some 40% of respondents were told to tread cautiously when raising diversity issues, while 45% of ethnic minority employees reported experiencing pressure to stay silent, compared to 35% of white employees, and 39% of all respondents observed efforts to “muzzle diversity advocates” over the past two years.

Baroness Helena Morrissey, chair of The Diversity Project, expressed concern over the findings. “With so little progress made to date and heightened racial tensions across the UK, it seems extraordinary that financial firms’ efforts to improve racial equality are diminishing or under threat,” she said.

The decline in diversity scores comes despite broader steps across the UK to address workforce inequality. Regulatory requirements, such as gender pay gap disclosures, have increased scrutiny on financial firms, exposing the sector as one of the most unequal in the UK.

Marshall Wace, the UK-based hedge fund major founded by Paul Marshall and Ian Wace, has adopted Bloomberg’s machine learning-powered real-time pricing data service, IBVAL Front Office, to enhance its systematic credit strategies, according to a report by FTF News.

IBVAL Front Office delivers updated pricing every 15 seconds for investment-grade and high-yield credit securities across USD, EUR, and GBP markets, providing a crucial edge in the liquidity spectrum, according to Bloomberg.

IBVAL employs advanced artificial intelligence techniques to generate precise, near real-time pricing for approximately 45,000 bonds, allowing users to access highly accurate estimates of a bond’s likely trading price.

The report quotes Eric Isenberg, Global Head of Enterprise Data Pricing at Bloomberg, as saying that: “Bloomberg has been utilising AI for over 15 years, and IBVAL represents our commitment to delivering innovative tools that enhance operational and trading efficiency. The near real-time speed of IBVAL’s pricing enables buy-side clients to actively manage portfolios, execute trades, and develop credit algorithms with greater confidence.”

Marshall Wace, which manages $69bn in assets, integrates IBVAL data for idea generation and pre-trade analysis, especially during pre-market hours when pricing high-yield bonds can be particularly challenging. The hedge fund’s global operations rely on a mix of quantitative, systematic, and fundamental strategies, primarily in long-short equity, supported by proprietary systems.

The US Treasury Department has launched an investigation into JPMorgan Chase over its dealings with a hedge fund allegedly tied to Iranian oil trader Hossein Shamkhani, raising questions about compliance with financial regulations, according to a report by Bloomberg.

The probe, which is still in its early stages, focuses on whether JPMorgan adhered to all applicable rules when it accepted Ocean Leonid Investments as a client. The report cites unnamed sources familiar with the matter as revealing that the hedge fund, which operates from offices in London, Dubai, and Geneva, and was recently suspended by Dubai’s financial free zone, is reportedly part of a network linked to Shamkhani.

Ocean Leonid’s alleged ties to the Iranian were first revealed in a Bloomberg report on 24 October, which also noted that JPMorgan, ABN Amro Bank NV, and Marex Group had provided leverage to the firm.

Spokespeople for JPMorgan, the US Treasury, and Ocean Leonid have declined to comment, while Shamkhani did not respond to a request for comment through his lawyer.

In a previous statement, an Ocean Leonid representative denied allegations of Shamkhani’s involvement, asserting that the hedge fund categorically rejects any claims of his oversight. Shamkhani’s lawyer similarly denied any relationship between his client and Ocean Leonid.

Currently, there is no obligation for JPMorgan to terminate its relationship with Ocean Leonid, as neither Shamkhani nor the hedge fund appears on any US sanctions lists. However, the Treasury is keenly interested in Shamkhani’s activities and is exploring the potential for compliance lapses by the bank, according to sources.

The Federal Reserve is also examining Western financial institutions’ exposure to Shamkhani’s network, although a Fed spokesperson declined to comment.

Shamkhani’s father, Ali Shamkhani, a key adviser to Iranian Supreme Leader Ayatollah Ali Khamenei, was sanctioned by the US in January 2020. The sanctions cited his prominent role in shaping Iran’s defence policies and coordinating intelligence and economic activities in alignment with the Supreme Leader’s directives.

GCQ Funds Management, a Sydney-based hedge fund with an impressive annualised return of 30% since its 2022 launch, is betting on Japan’s burgeoning cloud accounting market as its next major growth driver, according to a report by Bloomberg.

The firm recently increased its stake in Money Forward, a small-cap stock it believes could quintuple in value over the next five years, fuelled by regulatory shifts requiring businesses in Japan to maintain electronic receipts.

At the same time, GCQ has exited positions in rating giants Moody’s Corp and S&P Global, citing diminished upside potential as investor expectations caught up with their robust performance.

The hedge fund’s strategy revolves around investing in sector-dominant companies with strong pricing power — a key advantage in today’s inflationary environment. Visa and Alphabet alone make up significant portions of the fund, with newer investments like Money Forward representing less than 5%.

“This is the first time a new company has passed our investment checklist in over three years,” said Doug Tynan, GCQ’s Chief Investment Officer and co-founder, in an interview. “Cloud accounting software is exceptional because these companies often operate as local monopolies.”

Tynan shared that the decision to invest in Money Forward was years in the making. The firm had been monitoring the company for nearly eight years but refrained from investing until it met their cash flow requirements. The turning point came earlier this year when one of Money Forward’s main competitors implemented a significant price hike, signalling a shift in market dynamics.

GCQ’s concentrated portfolio of around 20 stocks is designed to capitalise on the changing outlooks of dominant players. Tynan revealed that half of the fund’s outperformance comes from actively trading these stocks based on evolving industry conditions.

As of October, the fund had allocated about 13% of its holdings to Alphabet and Meta Platforms, and nearly 20% to payment giants Visa, and Mastercard. According to its latest investor letter, the fund has delivered net annual returns of 30.2% since its inception.

Two Sigma Investments, one of the world’s leading quantitative hedge funds, is laying off approximately 200 employees following a comprehensive review of its operations by its new Co-Chief Executive Officers, according to a report by Bloomberg.

The dismissals, representing about 10% of the firm’s 2,000-strong workforce, affect roles across corporate, engineering, modelling and trading, and securities departments. Portfolio managers were not included in the cuts, according to an unnamed Bloomberg source familiar with the matter.

The restructuring marks the first significant action by co-CEOs Carter Lyons and Scott Hoffman, who assumed leadership in September after the firm’s billionaire founders, John Overdeck and David Siegel, stepped down from day-to-day management amid escalating tensions.

Overdeck and Siegel, who co-founded the firm in 2001, remain chairmen and retain their equity stakes. However, their strained relationship led to a historic management overhaul, with the discord flagged as a material risk in a March 2023 regulatory filing — a rare disclosure for a hedge fund as secretive as Two Sigma.

The internal challenges have not derailed the firm’s performance with its Absolute Return Enhanced Fund, the largest by assets, gaining 11.2% this year through mid-November, according to a source. Two Sigma’s total assets under management have reached a record $64bn.

President-elect Donald Trump has nominated Scott Bessent, the founder of hedge fund Key Square Group, as Treasury secretary, signalling his preference for a seasoned financial expert and loyal ally to oversee US fiscal policy and economic strategy, according to reports.

Bessent, 62, who Trump has previously described as “brilliant”, was a leading contender for the role alongside former Federal Reserve Governor Kevin Warsh and private equity executive Marc Rowan. If confirmed, he will step into a pivotal role, navigating the nation’s economic landscape amid a growing economy, rising debt, and significant fiscal challenges.

In a statement, Trump hailed Bessent as “one of the world’s foremost international investors and economic strategists,” describing his career as emblematic of the American Dream. Trump emphasised Bessent’s alignment with his economic vision, including support for tariffs, deregulation, a revival in manufacturing, and energy independence.

In a statement, Trump said: “Scott will support my policies to drive US competitiveness and end unfair trade imbalances.

“Unlike in past Administrations, we will ensure than no Americans will be left behind in the next and Greatest Economic Boom, and Scott will lead that effort for me.”

Bessent’s hedge fund, Key Square Group, launched in late 2015 with $4.5bn, making it one of the largest hedge fund launches in history at the time—including a $2bn investment from George Soros, the legendary macroeconomic investor, for whom Bessent had previously helped generate billions during two tenures at Soros Fund Management.

Key Square’s debut year, 2016, saw its main fund surge by 13%, which the firm gained by correctly predicting the British pound’s decline following the Brexit referendum, according to sources familiar with the fund. Later that year, Bessent also capitalised on a US stock and dollar rally after Donald Trump’s election victory.

Despite its promising start, the fund faced challenges, losing 7% in 2017 and then seeing flat or negative returns between 2018 and 2021, according to disclosures from the New York City Police Pension Fund, an investor in the fund. However, Key Square rebounded with double-digit gains in both 2023 and 2024 and has posted overall double-digit growth since inception, according to a source familiar with the performance.

The firm’s uneven returns seem to have deterred many investors with assets under management (AUM) falling sharply from a 2017 peak of $5.1bn to just $577m by the end of 2023, and the number of institutional investors shrinking from 180 in 2017 to 20 by 2023, according to regulatory disclosures.

While Key Square’s hedge fund AUM has diminished, the firm has expanded into other areas, including providing investment ideas to other money managers, managing up to $1bn for a large macro investment firm, and running an advisory business for family offices, foundations, and endowments, including one client with $11bn in assets.

The firm collects fees from Ghisallo Capital, a $3.4bn spin-out incubated by Key Square.

As Treasury secretary, Bessent will be central to advancing Trump’s economic agenda, advising on fiscal policies and managing the US government’s financial challenges. These include a national debt exceeding $36tn, an annual deficit nearing $2tn, and debt service payments projected to hit $1.2tn by fiscal 2025.

Bessent will also oversee financial institutions, combat financial crimes, and spearhead economic policies aimed at bolstering US competitiveness. He will succeed outgoing Secretary Janet Yellen, the first woman to serve as both Treasury secretary and Federal Reserve chair.