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The Securities and Exchange Commission (SEC) has been dealt another significant defeat in its regulatory push after a Texas federal judge overturned a rule requiring certain firms to register as dealers in the US Treasuries market, according to a report by Bloomberg.

US District Judge Reed O’Connor in Fort Worth ruled in favour of hedge funds that had sued to block the SEC’s rule, arguing it was overly broad and could harm market liquidity by discouraging trading. O’Connor stated that the SEC had exceeded its authority, calling the agency’s actions “unlawful.”

The ruling comes at a pivotal moment for the SEC, as its chair, Gary Gensler, announced plans to step down in January. His tenure has been marked by contentious regulatory efforts, including actions on cryptocurrencies and private funds, which critics argue stretched the agency’s jurisdiction. President-elect Donald Trump had previously vowed to dismiss Gensler.

The SEC has not yet indicated whether it will appeal the decision. If it chooses to do so, the case would head to the 5th US Circuit Court of Appeals in New Orleans, a court that recently invalidated another SEC rule aimed at increasing fee transparency for hedge funds and private equity firms. The SEC abandoned its legal challenge in that case.

The overturned rule was part of an effort by the SEC to expand its oversight by labelling certain hedge funds and trading firms as dealers, subjecting them to stricter regulatory scrutiny and higher compliance costs.

The Managed Funds Association (MFA), Alternative Investment Management Association, and National Association of Private Fund Managers had collectively challenged the rule, arguing it ignored the fundamental differences between dealers and asset managers.

Diego Megia, the Chief Investment Officer at hedge fund Taula Capital Management, is optimistic about the potential of EU bonds despite recent challenges facing the bloc’s joint-debt issuance programme, according to a report by Bloomberg.

Speaking at the Sohn London Investment Conference on Wednesday, Megia highlighted what he sees as a compelling investment opportunity in these securities.

“The bonds are undervalued compared to similarly rated sovereigns,” Megia stated, predicting that spreads could tighten by as much as 40 basis points if the bonds are reclassified into major sovereign bond indexes.

The EU has been actively lobbying index providers to classify its bonds as sovereign debt, a change that could significantly enhance its attractiveness to investors. While MSCI and ICE have declined to make the adjustment, Bloomberg Index Services Limited is currently reviewing the proposal.

Taula Capital Management launched earlier this year with $5bn in assets, including $3bn in backing from Millennium Management. The fund focuses on macro strategies, fixed-income relative value trades, and inflation-risk opportunities.

Megia, a former senior trader at Millennium, sees the EU bond market as poised for growth, especially if the securities gain broader acceptance among global sovereign bond investors. “This is an opportunity for investors,” he reiterated, underscoring his confidence in the bonds’ potential to deliver value.

Redwood Capital Management, an opportunistic credit-focused hedge fund with $9.4bn in assets under management, is preparing to raise $2.25bn for a new distressed debt drawdown fund, according to a report by Bloomberg.

The report cites an investor letter seen by Bloomberg as revealing that the fund will focus on distressed and special situation investments.

The move follows strong performance from Redwood’s previous drawdown fund, which has achieved a 31.6% net internal rate of return (IRR) in 2023 and a 17.4% IRR since its launch in 2021. The firm attributes these results to opportunities arising from market disruptions like the Ukraine war, rising interest rates, and inflation. To date, Redwood has deployed 50% of that fund’s capital.

For its upcoming fund, Redwood plans to increase the size of its investments, aiming to secure greater influence in the contentious restructuring negotiations that have become increasingly common in the distressed debt landscape. This approach is designed to address what the firm describes as “adversarial creditor transactions” and aggressive liability management practices, which have emerged following years of low interest rates and weaker debt protections.

“By holding larger positions, we can better defend our rights and influence outcomes,” wrote Ruben Kliksberg, Redwood’s co-chief investment officer, in a 21 October letter to investors.

The global market for distressed debt remains challenging, with Bloomberg’s tracker estimating just over $500bn in distressed assets, near the lowest levels of 2023. Despite this, distressed-debt hedge funds have performed well, with an average return of 11.1% this year, according to PivotalPath data.

Founded in 2000, Redwood’s master fund — focused on distressed and stressed credits — has delivered a 16.2% net return year-to-date for its main series, based on October-end figures. Meanwhile, the firm’s opportunity fund, which manages $2.4 billion, reported a 12.5% return for the same period.

The new drawdown fund is expected to close on 16 June, 2025, with investments set to begin the following month.

Spain’s High Court has launched an investigation into US-based hedge fund Gotham City, accusing it of disseminating “misleading” information about Spanish pharmaceutical firm Grifols, which triggered a sharp decline in the company’s stock price, according to a report by AFP.

The probe centres on a research note released by Gotham City in January 2023, which accused Barcelona-based Grifols of manipulating financial data to artificially lower its debt ratio and financing costs. Grifols, known for its blood plasma-based medicines, saw its shares plummet by nearly 25% following the report. The company has consistently denied the hedge fund’s claims.

According to the court, Gotham City may have violated market and consumer protection laws by distributing “biased and misleading” information to encourage investors to sell Grifols shares. The fund reportedly earned a profit of more than €9.4m ($9.9m) by short-selling Grifols stock after publishing the report.

Gotham City, a prominent short-seller, has targeted several high-profile companies in recent years, with its tactics having previously contributed to corporate collapses. In 2014, Spanish Wi-Fi provider Gowex went bankrupt following Gotham City’s damning report on its financial practices.

The court’s investigation into Gotham City follows significant fallout for Grifols, including major management changes. The company appointed a new CEO and CFO earlier this year as it worked to rebuild investor confidence.

In July, the Grifols family — owners of roughly a third of the company — and Canadian investment fund Brookfield began discussions to take the pharmaceutical firm private. On Tuesday, shortly after the court announced its probe into Gotham City, Brookfield proposed a tentative, non-binding €6.45bn bid to acquire Grifols, offering €10.50 per A share, which Grifols swiftly rejected on the basis that it “significantly underestimated” the company’s long-term potential and financial outlook. The firm’s stock last traded at €10.40, down 4.6% on the day.

Activist investment firm Gatemore Capital Management has used the 2024 Sohn London Investment Conference to publicly call on YouGov, a market research and data analytics company, to initiate a sale process to unlock shareholder value.

According to a press statement, the firm believes that despite YouGov’s many strengths, mismanagement and a lack of strategic clarity have left its share price significantly undervalued.

YouGov, headquartered in London, is a pioneer in online market research with a proprietary data panel of 29 million individuals spanning 55 countries.

Gatemore highlighted several key attributes supporting the company’s potential for long-term growth, including its unique data panel, which it regards as a difficult-to-replicate asset that creates high barriers to entry.

In addition, Gatemore highlighted YouGov’s global reach with diversification across sectors and geographies, and exposure to high-growth markets, as well as its revenue model which sees over 50% of sales coming from a “survey once, sell many times” model, enhancing operating leverage.

Gatemore also believes fragmentation in the $142bn insights industry presents consolidation possibilities.

YouGov has a 15-year track record of revenue growth, margin expansion, and robust free cash flow of – 70% operating FCF over the past five years. Despite these strengths, the company’s shares are down 70% from their 2022 peak and trade at valuations far below industry averages.

Gatemore attributes the decline to several missteps by YouGov’s management, including insufficient and delayed updates on financial performance, which have eroded investor confidence; a lack of clear plans to achieve mid-term targets, leaving a gap between management’s projections and market expectations; and minimal share ownership among non-executive directors (less than 0.05%) which raises questions about alignment with shareholders.

In addition, Gatemore cited YouGov’s listing on AIM as a structural disadvantage, noting the index’s underperformance relative to the FTSE 250 and Russell 2000, alongside significant capital outflows.

Gatemore is urging YouGov to conduct a strategic review, with a potential sale of the business as the most direct path to unlocking its intrinsic value. The firm believes new ownership could better capitalise on YouGov’s strengths while addressing governance and market-related challenges.

By Claire Sawyer, Associate Director of Content Development, CAIA Association

By Madison Murphy, Associate, FS Investments 
& Daniel Wilk, CAIA, Executive Director and Client Portfolio Manager, FS Investments

By Claire Sawyer, Associate Director of Content Development, CAIA Association

Bankrupt cryptocurrency exchange FTX has filed a lawsuit against Anthony Scaramucci and his hedge fund, SkyBridge Capital, as part of its broader strategy to recoup funds for creditors following its collapse, according to a report by Fortune.

The report cites court documents as revealing that the lawsuit against the former White House Communications Director is one of 23 cases filed Friday in Delaware’s bankruptcy court. Other defendants in the suits include the digital-asset exchange Crypto.com and political organisation FWD.US, which was co-founded by Mark Zuckerberg.

FTX alleges that during the challenging “crypto winter” of 2022, founder Sam Bankman-Fried undertook “a campaign of influence-buying,” making costly and high-profile “investments.” According to the filing, one key relationship he targeted was with Scaramucci, leveraging the financier’s “established financial, political, and social” connections.

The company now argues these investments “offered little to no benefit” and merely served to enhance Bankman-Fried’s status in political and financial circles. FTX claims that Bankman-Fried invested $67m in SkyBridge ventures in 2022, suggesting that Scaramucci was “seeking a bailout” as SkyBridge’s assets under management had declined from a peak of $9bn in 2015 to $2.2bn. FTX is seeking to recover over $100m in damages.

In September 2022, Bankman-Fried and Scaramucci publicly announced that FTX Ventures would acquire a 30% stake in SkyBridge, although financial specifics were not disclosed. Scaramucci commented at the time that the investment aligned with his vision for SkyBridge over the coming decade.

Just months later, FTX filed for bankruptcy, and Bankman-Fried was arrested in the Bahamas on charges of fraud.

A representative for Scaramucci declined to comment on the lawsuit.

Elliott Investment Management, one of the world’s largest activist investment firms, has named Samantha Algaze as its first-ever female Partner and promoted two other Partners, John Pike and Pat Frayne, to its management committee, according to a report by Bloomberg.

The report cites an unnamed source familiar with the situation as confirming the appointment begins Monday.

Algaze, a Senior Portfolio Manager, has been with Elliott since 2013 and has played a key role on the firm’s credit investment team. Her work includes high-profile trades involving Caesars Entertainment and a former cybersecurity unit of McAfee known as Magenta Buyer.

Pike and Frayne, meanwhile, have joined the firm’s 12-member management committee. Pike has been instrumental in Elliott’s activist campaigns, most recently engaging with Southwest Airlines. Frayne’s focus includes structured credit, along with interest rate and currency trading.

With these promotions, Elliott now has 15 partners in total, including all management committee members, as well as Marc Steinberg, Jason Genrich, and Samantha Algaze.