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The world’s biggest hedge fund has secured $22 million of financial assistance from the government of Connecticut, reports FT. The hedge fund, Ray Dalio’s Bridgewater Associates,has $146bn of assets under management.
A meeting of Connecticut’s bond commission on Friday approved $5 million in grants for Bridgewater and a $17 million loan that will be forgiven if fund creates 750 jobs in the state.
“We have come regretfully to the conclusion that the current algorithmically driven market environment is one which is increasingly incompatible with our fundamental, research orientated, investment process. The bear market in emerging market equities, which began in 2011, may eventually engulf developed markets too.”
Three weeks ago when news of the dramatic gating and liquidation of Third Avenue’s high yield debt focused fund first hit, we said that “now that the dreaded gates are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity – and liquidation – scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well.”
Sure enough, promptly thereafter several other junk-debt focused hedge funds shut down, culminating with yesterday’s liquidation of Whitebox’s various multistrategy mutual funds.
And now, moments ago we learned, another hedge fund has decided to call it quits, this time chess-afficionado Doug Hirsch’s event-driven $500 million Seneca Capital, which according to Bloomberg is returning most outside capital by today.
BlackRock Inc., the world’s largest asset manager, is winding down a global macro hedge fund after losses and investor redemptions eroded assets. The reason for the liquidation: losses of 9.4% this year, cited by Bloomberg according to an October investor document, leading to the worst year for the asset manager since inception in 2003. The fund, which had $4.6 billion in assets just two years ago, has shrunk to less than $1 billion as of Nov. 1.
“As you know, the environment for global macro fundamentals-based trading continues to be challenging. That factor, combined with the lack of certainty over when a recovery will take hold, led us to conclude that the time was right to return capital to you.”
– Ben Bernanke To Join World’s Most Levered Hedge Fund: HFT Powerhouse Citadel (ZeroHedge, April 16, 2015):
Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed – through a slightly more than arms-length arrangement – does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed’s broker commission statement. In fact according to some, indirect Fed compensation to what is the world’s most leveraged hedge fund has been in the billions over the past decade.
Well, now it’s payback time, and as the NYT reported overnight, the Brookings Institution’s favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor.
– And The Worst Performing Strategy In 2014 Is… (ZeroHedge, May 25, 2014):
Hedge fund performance continues to be weak so far in 2014 and this week was no different as long/short funds found to their dismay that trading on rational thought and fundamental analysis was for losers. However, global macro strategies are doing the worst of all as carry trades unwind, sanctions create inflows, and geopolitical chaos creates nonsense from sense. The best performing hedge fund strategy… buying-the-most-shorted is beaten only by Bonds.. and in first place of all assets – Gold.
As Goldman explains…
– Making $400,000 Per Hour, The Best Paid Hedge Fund Manager In 2013 Was… (ZeroHedge, May 6, 2014):
When it comes to returns, 2013 will be best remembered as the fifth consecutive year in which the S&P 500, lead by Chief Risk Officer and Portfolio Manager Ben Bernanke (replaced by Janet Yellen in 2014 following a bumper 30%+ year), outperformed over 90% of all hedge funds, which as the recent beta blow up has shown, have virtually no original “alpha” ideas, and all merely piggyback on the same high beta “greater fool”, hedge fund hotel trades and/or lever on beta as much as their Prime Broker will allow them (in many cases quite a lot).
And yet, hedge fund investors were perfectly happy to keep handing over 20% of their upside and paying a 2% management fee when they could have generated the same returns for free by simply buying the SPY ETF.
According to a just released ranking by Institutional Investor magazine, The 25 top earners of 2013 raked in a total of $21.15 billion. That’s roughly 50 percent more than the 25 best-paid managers reaped in each of the previous two years. Four managers earned more than $1 billion, while a fifth just missed that distinction. To qualify for the list, a manager needed to have earned at least $300 million in 2013, or 50 percent more than the 2013 cutoff.
– White House Former Chief Of Staff Joins Hedge Fund Launched By Former JPM Prop Traders (ZeroHedge, April 24, 2014):
“The amount of experience he has is ridiculous,” says former JPM prop trader Galuti, adding “- in a positive way,” as he explains why former Clinton Commerce secretary (and Obama chief of staff) Bill Daley has joined the small Swiss-based hedge fund. The revolving door of favors continues as Daley, who The FT reports will be based in Chicago and oversee US expansion (as well as provide macroeconomic and political advice), joins an ever-growing number of former Obama administration officials to have taken jobs in the financial sector.
As The FT reports, Bill Daley, the former White House chief of staff, is to join the hedge fund Argentière Capital, which was founded last year by leaders of JPMorgan’s disbanded proprietary trading division.
Mr Daley, who was also Commerce Secretary under President Bill Clinton, joins a number of former Obama administration officials to have taken jobs in the financial sector.
He will be based in Chicago and help spearhead the fund’s US expansion, as well as provide macroeconomic and political advice.
– 16 Major Firms May Have Received Early Data From Thomson Reuters (Rolling Stone, Sep 5, 2013):
Readers may recall an ugly story that broke earlier this summer, when New York State Attorney General Eric Schneiderman rebuked the news/business information firm Thomson Reuters for selling access to key economic survey data two seconds early to high-frequency algorithmic traders. The story strongly suggested that some Thomson Reuters customers were using their two-second head start (an eternity in the modern world of computerized trading) to front-run the markets.
“The early release of market-moving survey data undermines fair play in the markets,” Schneiderman said, back in the second week of July. Thomson Reuters suspended the practice of selling two-second head starts after Schneiderman insisted upon a change. Still, the firm defiantly refused to declare the change permanent and insisted that it had the right to “legally distribute non-governmental data” to “fee-paying subscribers.”
It turns out that there’s more to the story.
– Hedge funds, insider traders begin dumping Monsanto stock as reality of GMOs sinks in across Wall Street (Natural News, Aug 23, 2013)
– Stunning Volume On Gold & Silver Smash In Suspect Trading (King Wolrd News, June 20, 2013):
“And if you need to sell, why are you selling at the worst time of day? Why are you selling in Asian time, which is always the thinnest section of trading? Why don’t you wait for London and Chicago to take over?
And the answer is very obvious: These markets are clearly and blatantly being manipulated. The people doing it have clear price objectives. My guess is they want to see a print below $1,300 (on gold) before they are done. That will allow people (trading for the bullion banks) to make profits on their shorts.
– John Paulson Loses Over $300 Million On Friday’s Gold Tumble (ZeroHedge, April 13, 2013):
There were many casualties following Friday’s 4% gold rout, but none were hurt more than one-time hedge fund idol John Paulson, who according to estimates, lost more than $300 million of his own money in one day.
Per Bloomberg: “Paulson has roughly $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. Gold dropped 4.1 percent today, shaving about $328 million from his net worth on this bet alone.” This is merely the latest insult to what has otherwise been a 3 year-long injury for Paulson and his few remaining investors, whose very inappropriately named Advantage Plus is among the bottom 10 hedge funds for the third year in a row. Yet despite being a one-hit wonder thanks to one lucrative idea (long ABX CDS) generated by one of his former employees (Pelegrini), Paulson still has been lucky enough to somehow amass a $10 billion personal fortune which can have a $300 million downswing in one day, even if it is in an asset class which eventually will go only one way – up. Unless, of course, like so many other fly by night billionaires, Paulson too hasn’t somehow managed to lever up all his equity into numerous other downstream ventures, and where a $300 million blow up leads to margin calls and other terminal liquidity outcomes.
“The recent decline in gold prices has not changed our long-term thesis,” John Reade, a partner and gold strategist at Paulson & Co., said in an e-mailed statement. “We started investing in gold at $900 in April 2009 and while it’s down from its peak to $1500, it’s up considerably from our cost.”