Hedge Fund Collapse in Sweden Puts Spotlight Back on Quants (link)
As one of Sweden’s oldest hedge funds shuts its doors, its chief acknowledges the firm’s quantitative strategies failed to cope with pandemic-induced market ructions.
IPM, a systematic macro fund, started bleeding client money with about $4 billion in AUM flowing out since late 2019, leaving it with only $750 million.
Last year was particularly tough for computer-driven quant funds. Algorithms largely failed to decipher the impact of a rapidly moving virus and the response from central banks to contain economic damage.
IPM joins a growing list of hedge funds shutting down in recent years as investors rethink their allocations to the industry. More hedge funds have closed than started in the last six years, with 770 of them shuttering in 2020.
Hedge Funds Fall Further Out of Love With Yearlong Stock Rally (link)
Hedge funds are increasingly hitting the exit button on a stock rally that has defied every forecast of doom.
While the divergence to some degree reflects time-tested postures, the pace of retreat is getting notable. “We’re overdue for a little bit of a storm,” said John Porter from Mellon Investments. “You pull up a chart for the S&P 500 and it’s just every drop has been bought for the last six-plus months.”
No single view explains hedge-fund bearishness, though the retreat coincides with a spike in virus cases and pullback in Treasury yields.
That stands in contrast with the retail crowd where inflows picked up Tuesday, with purchases reaching $1.4 billion
Not long ago, such a bifurcation would be a warning to the newbies. But after retail traders repeatedly outsmarted their big-league rivals during the last 14 months, the picture is murkier.
World’s Longest Short-Selling Ban Coming to an End in Korea (link)
On May 3, Korea is set to partially lift the ban it imposed in March last year on the key hedge fund strategy, world’s longest pandemic-imposed ban on the trading strategy.
Korea Stockholders Alliance, a group of influential day traders, is seeking “fairer” rules around the practice, among them that individual investors have access to the same high levels of margin loans as their institutional counterparts.
Investors will be allowed to borrow shares on the benchmark Kospi 200 Index and the small-cap Kosdaq 150. This represents 22% of Kospi stocks, or 88% of Kospi’s market value
They can now sell short up to 30 million won ($27,000) of stocks with that limit going up over time, and all 28 of the country’s top brokers will lend them stocks -- up to a maximum of 2.4 trillion worth of shares.
Archegos Collapse Exposes an SEC Blind Spot (link)
Attention is now being paid to the ability of money managers to hold highly complex and risky derivative-based investments without letting anyone know, including own investors.
Greater disclosure helps markets price risk better. Financial crises and major losses often emerge from unseen and undisclosed risks, when nobody understands the size of the potential problem until it’s too late.
Disclosure requirements can be expensive, complex and may deprive a secrecy that the strategies depend on. But the benefits: Greater disclosure brings greater transparency, which leads to healthy markets. The more you know, the less risk you take.
The disclosure can often be used to hide, not reveal. At the SEC I fought hard for “plain language” requirements, a convoluted or deliberately dense prospectus is as good as no prospectus as all.
Any eventual rule should have one overriding goal: Explain the investment as clearly as possible and, importantly, its potential risks, including the amount of potential loss the investment entails.
Crypto hedge fund BKCoin Capital strengthens team with new quantitative trading head (link)
Digital assets hedge fund BKCoin Capital has named Mark Treinkman as head of quantitative trading.
Treinkman was most recently at Pattern Capital Management, where he had been a software developer, portfolio manager, quantitative trader, and financial advisor
BKCoin Capital, which manages around USD50 million, was co-founded in 2018 by ex-commodities and equities manager Carlos Betancourt and Kevin Kang
The firm’s market neutral Digital Asset Fund looks to generate gains from price inefficiency and volatility within cryptocurrencies using a trading model. Last year, it generated 71.5%.