Halloween has passed, but times have never been scarier for the hedge fund industry’s grassroots players.
October was a brutal month for almost every business, regardless of their strategy. Multi-strategy giants like Millennium Management and Balyasny Asset Management lost money, while macroeconomic superstars like Greg Coffey and credit prodigies like Hamza Lemssouguer made headlines for the wrong reasons. The carnage shows no signs of slowing, as artificial intelligence stocks fell Thursday following Democratic dominance in Tuesday’s midterm elections.
It’s been a bloody time for an industry known for its insatiable demand for investment in people, which may justify Elliott Management founder Paul Singer’s view that the war for talent has been “exaggerated” by “the relentless bull market.”
“The next serious bear market could lead to a complete rethinking of how investors determine excellence,” he wrote in a letter to investors in late January.
The consequences of these losses come as no surprise to those familiar with the cutthroat nature of the industry: nameplate changes. There is very little patience for those who don’t make money, especially in the face of sprawling multi-strategy funds that, on average, turn over more than 20% of their portfolio managers each year.
On the stock-picking side, Walleye Capital and Engineers Gate just cut top executives including Anil Gondi and Mike Daylamani, respectively, as well as other stock-focused employees, while Balyasny’s Corbets unit got rid of investors in October, Business Insider reported. The funds struggled with a volatile market in October when several big tech stocks, such as Meta and Intel, sold off.
At the same time, macro traders have had to deal with the ripple effects of rising interest rates, war-induced fluctuations in oil prices and an electoral surprise in Brazil.
The wave of deletions and departures
The result was the worst month on record for Kirkoswald Capital, the firm run by Coffey, the macro-investing legend nicknamed “The Wizard of Oz.” The manager has fallen more than 6%, although its year-to-date gains are still more than 16%, a person close to the manager told Business Insider.
There have also been numerous staff departures from macro-trading desks in the sector. ExodusPoint, the multi-strategy fund focused on fixed income, saw two pedigree PMs leave its Dubai office less than a year after joining, and it also recently fired currency trading legend Jim Leitner, a person close to the manager said.
In the land of credit, where an influx of corporate paper has distorted the market, Arini Capital’s Lemssouguer has sold hundreds of millions of positions from his plummeting book — even as the young founder isn’t hunkering down and licking his wounds. An attendee at Bank of America’s recent industry conference in Miami said London-based Lemssouguer met with investors in Florida and spoke on stage about his views on the market.
Arini declined to comment.
Meanwhile, credit traders have been put to the test on well-known investment platforms. Manav Gupta, who joined Millennium earlier this year, has already left Izzy Englander’s fund. And Brevan Howard, the $35 billion manager, has parted ways with five credit portfolio managers as his head of credit trading, Andy Silver, moves to an advisory role. Brevan’s two largest funds – Alpha Strategies and its master fund – are both roughly flat for the year.
All told, the onslaught of trading losses and pink losses has been staggering, even for grizzled veterans.
“It’s definitely adult swimming time now,” said one longtime portfolio manager, who told Business Insider they had survived “for now.”
Gn bussni
