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By Michael A. Ervolini, Distinguished Fellow, FactSet Research Systems, Inc.

Behavioral Matters is a series of essays on the application of Behavioral Finance written specifically for professional investors and portfolio managers.

"Good decisions come from experience. Experience comes from making bad decisions.” - Mark Twain

By Brian A. Schroeder, the founder of OCIO Monitor, a specialty consulting firm that provides due diligence of investment consultants and outsourced chief investment officers.

White Elk Partners, the global macro hedge fund firm founded by Carl Radford and Michael Rothlin, has marked its one-year anniversary by securing a licence to operate as a registered Investment Manager in Hong Kong.

White Elk Partners offers a diverse mix of relative value and macro directional trading styles, designed to deliver returns to HNW, family office, and institutional investors across all market conditions.

The firm, managing AUM across its flagship Alpha Fund and SMA strategies, delivered a 12.87% return during the first year of trading to 30 September 2024.

Its global macro relative value strategy targets uncorrelated returns in the mid-teens and is designed as a lower volatility diversifier to equities.

White Elk Executive Anthony Bathurst said the approval of its investment management licence by the Securities and Futures Commission in Hong Kong marks a significant milestone for the firm. “With our investment management licence in place, we can now fully activate the strategic operating model we have built with tier-one partners over the past year,” he said. “Establishing a robust and scalable model to support our underlying investment strategy under the White Elk label has been a key priority as we continue to grow the business.”

The firm has developed a purpose-built institutional grade investment management model which is underpinned by partnerships with best of breed global firms including Goldman Sachs, JP Morgan, BNP Paribas, PwC, Ogier, and Mayer Brown.

White Elk Partners expects the formal granting of its investment management licence to drive substantial increase in its AUM, with plans to embark on a significant capital raise in the vicinity of $500 million.

CoinShares, a European specialist in digital assets investments has established a new US central office based in New York City, strengthening the company’s presence in the world’s largest financial market.

As a part of the growth initiative, CoinShares is actively recruiting for key roles in sales, marketing, operations, and compliance to support its commitment to scaling US operations.

The opening of the new office follows CoinShares entry into the US market through the recent acquisition of Valkyrie Funds, a digital asset manager known for its actively managed ETFs, and the sponsor rights to the CoinShares Valkyrie Bitcoin Fund from Valkyrie Investment. According to a press statement, the New York City office will serve as the primary hub for US operations, allowing the CoinShares “to deepen its relationships with American counterparties and support the company’s growing client base across institutional and retail markets”.

Code Willing has launched the CWIQ platform to help quant hedge funds streamline data analysis workflows for model development, simulation, and backtesting, allowing research teams to focus on data science, feature engineering, and alpha generation.

At the heart of this platform is CWIQ FS, a patented file system offering enterprise-level HPC scalability, simplified storage orchestration, and optimised performance, ideal for systematic trading and data science applications. By managing vast datasets across hybrid multi-cloud environments, CWIQ FS provides real-time metadata updates and integrates with object stores like S3, ensuring consistent and up-to-date views of firm data across locations.

“We designed the CWIQ Suite to avoid the complexity of unpredictable billing models while still offering cutting-edge performance,” said Rob Martinez, CRO of Code Willing, in a press statement. “With per-user cost controls, our solution enables teams to forecast usage, eliminating end-of-month surprises and giving firms full control over cloud spending down to the penny.”

Hedge funds are increasingly shaping the European dividend market, with futures on Euro Stoxx 50 Index dividends, once driven largely by autocallable product hedging, are now seeing heightened activity from multi-strategy hedge funds employing various derivatives, according to a report by Bloomberg.

This shift has led to a reduction in outstanding Euro Stoxx 50 dividend futures, with Eurex now recording around eight million contracts — down from over nine million at the peak in 2021, according to a recent report.

Since their launch in 2008, Euro Stoxx 50 dividend futures have been widely used to hedge dividend exposure on autocallable products – structured products often tied to equity indices and featuring set payout conditions. However, changes in issuance patterns have lessened the impact of autocallable hedging, reducing past volatility spikes in the market.

This shift was evident following August’s market instability, when Euro Stoxx 50 dividend futures lagged amid growth concerns for high-yield sectors like automotive, yet did not see the heavy activity typical in previous downturns, according to UBS strategist Kieran Diamond.

With a higher-rate environment, products are also shifting from equity autocallables toward fixed-income derivatives, says Antoine Deix, head of dividend and repo solutions at BNP Paribas. This has contributed to a more stable dividend market landscape, with trading desks primarily short gamma — a positioning that can increase volatility but also deepen market maturity, Deix added.

“Today, we’re less likely to see the kind of dislocations in the dividend market that characterised the years from 2008 to 2020,” he said, underscoring the evolving dynamics in European dividend derivatives.

Hedge funds, asset managers, and other speculators moved into bullish dollar positions in the week ending 22 October, holding around $9.2bn in long dollar bets, according to data from the Commodity Futures Trading Commission compiled by Bloomberg.

This marks the first net long dollar position since August and represents a major shift of $10.6bn from the previous week, when traders were net short on the greenback.

In October, derivatives traders have scaled back on bearish dollar outlooks due to stronger-than-expected US economic data and rising demand for haven assets as the US election draws close. A series of positive economic reports has led to a recalibration of previously dovish Federal Reserve expectations, contributing to this shift.

A Bloomberg dollar index has surged 3.2% so far this month, positioning the dollar for its best monthly performance in two years. At the same time, demand for hedges against potential dollar spikes has increased. The cost of calls versus puts on a broad dollar basket has risen significantly over the past month, nearing levels not seen since July.

Currencies with significant trade ties to the US — such as the euro, yen, Chinese yuan, Canadian dollar, and Mexican peso — are trading with notable risk discounts.

Leveraged funds further increased their short bets on the Mexican peso, with hedge funds adding 2,241 contracts to reach a total of 9,044 net short contracts, as reported by the CFTC.

The CFTC is set to release another snapshot of trader positioning on 1 November, just a week before the US election, which will offer insight into market sentiment heading into the critical period.

Balyasny Asset Management, the $20bn-plus multi-strategy hedge fund firm founded by Dimitry Balayasny, has strengthened its natural gas and power trading business in Denmark with the appointment of Federico Censi as a Gas Trader, according to a report by Financial News London.

Cesni who joins from MFT Energy, has been on gardening leave since quitting the Aarhus-based independent energy trading company in July, according to his LinkedIn profile.

The report cites unnamed sources familiar with the matter as confirming that Cesni, who spent one year and three months at MFT, is due to take up his new role in the third quarter of 2025.

Multi-strategy hedge fund major Millennium Management is exploring the launch of its first new fund since the company launched over three decades ago, to focus on investments in less liquid assets including private credit, according to a report by the Financial Times.

The report cites unnamed sources familiar with the matter as revealing that Millennium sees untapped potential in the private credit sector, which has grown rapidly into a nearly $2bn asset class as traditional banks have scaled back on core lending activities, and other less liquid markets, although it has yet to make a final decision on whether or not to launch the new fund.

Millennium, which now has around $69.5bn in assets, currently operates one flagship fund, managed by over 330 investment teams with strict risk controls. It trades in fundamental equity, equity arbitrage, fixed income, commodities, and quantitative strategies within liquid markets, and has seen a 9.5% gain in the first nine months of the year. Since inception, it has averaged 14% annual returns.

The firm competes with other multi-manager giants like Ken Griffin’s Citadel and Steve Cohen’s Point72, typically distributing capital across multiple teams and trading strategies. According to insiders, having recently raised an additional $10bn in deployable assets, it has yet to decide whether to raise new capital for a standalone fund or to reallocate from its existing capital pool.

With a significant portion of its flagship fund in a long-term share class requiring a five-year exit period, Millennium’s redemption horizon aligns more closely with private equity and credit funds than with most hedge funds, which typically offer shorter exit timelines.

Other hedge funds have already ventured into the private credit space, including Man Group, the world’s largest publicly traded hedge fund, which acquired US-based private credit firm Varagon last year.

Hedge funds turned bearish on the yen in the week leading up to Japan’s snap general election, as the ruling Liberal Democratic Party failed to secure a majority, potentially amplifying currency risks, according to a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission for the week ending 22 October as showing that speculative investors flipped to a net short position on the yen for the first time this month. This shift came just ahead of the election results, which have raised new challenges for Prime Minister Shigeru Ishiba to form a stable government and cast uncertainty on his political future.

With the yen already near its lowest levels since late July, Japan’s currency is now more vulnerable to political instability. Prime Minister Ishiba, previously seen as favouring a tighter policy stance, unsettled markets by recently suggesting Japan’s economy wasn’t prepared for further rate hikes. Now, traders are watching both Japanese political dynamics and the upcoming US election for cues to potentially extend their bearish positions on the yen.

Referencing a strategy that involves borrowing yen to invest in higher-yielding assets the report cites Shoki Omori, Chief Desk Strategist at Mizuho Securities, as saying: “If the government remains unstable, it will be easy for carry traders, including hedge funds, to sell the yen.”

The currency slid as much as 0.6% to 153.27 per dollar in early Monday trading, marking its weakest point in nearly three months. The drop could spur intervention from Japanese authorities, though investors are cautious about the election’s impact on Japan’s legislative process, which may dampen the yen’s appeal further.

Asset managers mirrored the bearish sentiment, switching to a net short of 17,226 yen contracts as of October 22—their first since mid-August, according to CFTC data.

By Blake Curtis of Wilshire Advisors.

A common catchphrase used to explain the importance of diversification is “Don’t put all your eggs in one basket.” This analogy of spreading risk is intuitive: One basket might break, one might be stolen, and one might end up in cold storage with a lost key. The eggs and baskets do well to illustrate the power of diversification to reduce risk but may not fully do the term justice.

By Vincent Weber, CEO and Co-founder of Resonanz Capital, a specialized investment advisory firm managing approximately $6 billion in assets under advisory (AuA) spanning hedge funds. 

Are you equipped to navigate the complexities of forecasting fund risks in actively managed portfolios? Discover whether Holdings-Based or Returns-Based Analysis offers the most reliable insights into a fund's risk profile.

By Ben Macmillan, co-founder and Chief Investment Officer of IDX and Joshua Myers, Director of Analytics and Head of Trading for IDX.

Summary: 

By Ros Bazany, Head of ESG and Impact at Antler, a global early-stage venture capital firm.

Antler is a global early-stage venture capital firm enabling and investing in the world’s most exceptional people building the defining companies of tomorrow. The team published their inaugural ESG and impact report last year with an aim to share their learnings and roadmap with the industry.

By Simon D. Zais, CAIA, Senior Manager, Business Development & Product Strategy, Egan-Jones Proxy Services.

By Hunter Hopcroft, Managing Director of Portfolio Solutions for Armada ETF Advisors, an ETF issuer focused on quantitative REIT research and asset management.