“Put into perspective” – the monthly newsletter of Skenderbeg Alternative Investments AG – is an informative, thought-provoking, and entertaining tour around the financial world.
"You are far better off with the failures of capitalism than the successes of socialism." - Garry Kasparov
YTD total alpha (long appreciation – short appreciation)
Global hedge fund sentiment
Beta-adj. gross has increased significantly since early '16; largest funds running high beta-adj. net
Quant equity on track for 5th consecutive year of +6-10% net inflows
Most factors that hurt in 2016 have helped in 2017 (US equities only)
1H17 hedge funds portfolio composition by investor type
European hedge funds market
"Psychopath" hedge fund managers make less money
Maybe the secret to success on Wall Street is being nice. In the world of high finance, it's been an article of faith among some that the only way to succeed—or even survive—is to be ruthless. But a new study in the latest issue of the Personality & Social Psychology Bulletin sug-gests those money makers at the top of the food chain, hedge fund managers, could benefit from being a little less mean. It turns out that people who exhibit what health professionals consider psychopathic traits actually perform worse than their peers over time.
Hedge funds are having their best year since 2013
Britain's taxman wants to make money from MiFID
Banks and money managers are waiting to hear if one of life's certainties -- taxes -- will apply to investment research payments under MiFID II. As the clock ticks down to the Jan. 3 start of the European Union's revised Markets in Financial Instruments Directive, the British taxman has been meeting with industry groups to discuss tax issues related to the law, a spokesperson said. Lawyers said they expect Her Majesty's Revenue and Customs to publish guidance on applying value added tax to research payments soon. At issue is a key requirement in MiFID II for asset managers to pay brokerages for stock and bond research rather than receiving it as part of a bundle of services, including trade execution, which tends to make it VAT-exempt. As a separate service, research can be hit with UK VAT of 20%. And that could force some firms to scale back.
Concerns of "brain drain" over extension of senior managers regime to asset managers & hedge funds
Plans from regulators to make top managers across the financial services industry personally responsible for the wrongdoing of their junior colleagues risk a "brain drain" away from the City. Some 44% of senior managers and compliance officers surveyed by regulatory consultants Bovill said it will be hard to attract quality candidates to the next generation of senior roles, because personal liability will be higher under the new regime.
The change in rules would mean individuals in senior roles could be held accountable for misconduct within their teams, with black marks against names potentially following managers around.
The New York "salary rule" will cause chaos for hedge funds
Employers in New York City, can't ask potential recruits how much they were paid in previous roles. The change is set to cause problems for anyone recruiting for banks, but chaos for anyone recruiting for hedge funds. At issue is the unpredictability of hedge fund pay. While banks' pay for front office "producers" typically falls within a range according to an individual's level in the banking hierarchy and can therefore be estimated, hedge funds' compensation for salespeople and traders varies widely and is often a percentage of the revenues an individual gen-erates. Under the new rules, recruiters are prohibited from making any form of upfront inquiry that can be used to elicit compensation lev-els. – They can't ask about pay. And most importantly, when a hedge fund is known to pay percentage deals, they can't ask about revenues either.
In an industry, where revenues are the measure of performance, this is a disaster. "You can't back into someone's compensation under these rules," says one New York trading headhunter, speaking off the record. "This means that I can't actually ask traders about the revenues they brought in last year, and that if I elicit this accidentally I can't use that information without risking a fine. The whole thing is a nightmare."
As we noted previously, the new rule makes it possible that recruiters will simply make incrementally low salary offers until they hit a level potential hires will accept. However, one recruiter says it could have the opposite effect: "If a bank or hedge fund mentions that it's willing to pay between $450k and $700k and the individual doesn't volunteer his or her previous pay level, the recruiter has an incentive simply to offer the candidate the higher level so as to bring in a bigger fee."
Article by Skenderbeg Alternative Investments AG