Weekly Update

Man Group introduces pass-through fees for multi-strat hedge fund

Man Group Plc, the world’s largest publicly traded hedge fund firm, is introducing pass-through fees for clients of its multi-strategy hedge fund, following a trend set by competitors like Millennium Management and Citadel, according to a Bloomberg report.

The report, based on a recent regulatory filing, reveals that these fees, intended to cover compensation and operational costs, will apply to new capital invested in the firm’s Man Strategies 1783 fund starting this month.

Pass-through fees are becoming increasingly common among multi-strategy funds as a way to attract top talent, improve infrastructure, and invest in technology. Investors, keen to access funds managed by experienced portfolio managers with a track record of consistent returns, are often willing to accept these added costs.

Managing around $178 billion, Man Group declined to comment on its fee structure.

Man Strategies 1783, launched in 2020 with $500 million and now managing $1.5 billion under Greg Bond, Man Group’s head of Americas, can allocate capital across roughly 70 internal strategies, blending discretionary and algorithmic approaches, according to documents seen by Bloomberg.

New investors in the fund will face pass-through fees to cover performance-related pay and recruitment costs, alongside lower management and performance fees of 1% of net assets and 15% of profits, respectively. While Man Group’s pass-through fees focus solely on compensation, other multi-strategy firms pass on a wider range of expenses, raising concerns among some institutional investors about potential inefficiencies in cost management. These pass-through expenses typically range between 3% and 10% of net assets.

Hedge funds make bullish moves on gold and silver as Fed’s easing cycle begins

Gold and silver are gaining strong momentum as hedge funds ramp up their bullish bets on the metals, driven by expectations of an upcoming easing cycle by the Federal Reserve, according to a report by Kitco News.

The report cites trade data from the Commodity Futures Trading Commission (CFTC), which shows a rise in speculative positioning for both metals.

Gold, in particular, has seen a significant increase in speculative interest. The CFTC’s Commitments of Traders report for the week ending September 17 revealed that money managers boosted their gross long positions in Comex gold futures by 28,199 contracts, bringing the total to 241,844 contracts. During the same period, short positions grew by 2,299 contracts to reach 25,489.

This surge in bullish positions has kept gold prices steady above $2,600 an ounce, with net long positions now at 216,355 contracts—a four-year high.

Some analysts have raised concerns that gold’s bullish positioning may be overextended, but the precious metal remains well-supported following a 50-basis-point rate cut by the Federal Reserve, which met market expectations. The Fed also signaled that it expects long-term interest rates to fall to 3% by 2026.

Silver is also experiencing a sharp rise in hedge fund interest. CFTC data shows that speculative gross long positions in Comex silver futures increased by 11,608 contracts, while short positions dropped by 2,190 contracts. This brings silver’s net length to 39,619 contracts, a two-month high, with prices holding above $31 an ounce during the survey period.

However, with over half of silver demand tied to industrial uses, sluggish economic growth could weigh on the metal's price.

New global macro hedge fund Palinuro Capital to start trading in January

Palinuro Capital, a new global macro hedge fund, has secured commitments of nearly $100 million and is set to begin trading in January, according to Reuters, as demand for hedge fund strategies continues to grow.

Global macro hedge funds typically trade a diverse range of assets, including bonds, currencies, and commodities, based on predictions about economic growth, inflation, and geopolitical events.

Headquartered in Amsterdam, Palinuro aims to deliver average annual returns exceeding 10%, with a focus on outperforming the market during periods of heightened volatility, founder and chief investment officer Alfonso Peccatiello told Reuters. "We are here to diversify investor portfolios, especially during turbulent times," Peccatiello said.

Investor interest in hedge funds has increased in the second half of this year, according to a BNP Paribas survey, which ranked macro strategies as the third most popular for allocations, behind equity and credit strategies. The survey noted that "discretionary macro is benefiting from inflation and unexpected shifts in monetary policy."

Rising inflation in 2022 triggered a series of rapid interest rate hikes across developed markets, leading to simultaneous declines in both bonds and stocks. This has undermined traditional investment strategies that rely on bonds to balance stock market downturns. "In years like 2022, when bonds fail to serve as a diversifier, that’s where we come in," Peccatiello added.

Palinuro Capital's $100 million in commitments comes from a range of investors, including family offices, endowments, pension funds, and asset managers. The Cayman Islands-domiciled fund will enter a three-month onboarding phase before its official launch in January, with Goldman Sachs serving as its prime broker.

The fund will primarily trade futures, options, and swaps, with a particular emphasis on interest rates and currencies across multiple regions. It will also invest in equities and commodities.