Weekly Update

Hedge funds scale back bullish yen bets amid market uncertainty

Hedge funds have scaled back their most optimistic bets on the yen, yet they continue to pay a premium to hedge their positions, indicating increased uncertainty about the future direction of the Japanese currency, according to a Bloomberg report.

The report quotes Ruchir Sharma, the London-based global head of FX option trading at Nomura International PLC, who noted that dovish remarks from Bank of Japan Deputy Governor Shinichi Uchida on Wednesday resulted in a roughly one-third reduction in the cost of hedging against yen gains over the next month. Despite the yen’s decline, Sharma stated that the cost of hedging remained elevated, close to where the forward market was priced.

“There has been a sharp repricing lower of the premium the market will pay to buy yen calls versus selling yen puts in the one-month tenor,” Sharma said. “Fast money has been actively engaged for the past 48 hours, but corporates and real money have stayed on the sidelines, waiting for more stability before stepping in.”

This week, the yen experienced significant fluctuations, initially surging as leveraged funds unwound short positions following last month’s Bank of Japan rate hike, but quickly retreating after Uchida’s comments. The currency traded below 142 yen per dollar on Monday before approaching 148 on Wednesday.

Arkaim Advisors to launch distressed and credit opportunities hedge fund

Arkaim Advisors, a specialist in emerging market corporate debt investments, is set to launch a new hedge fund focusing on global distressed and credit opportunities, with a particular emphasis on emerging markets, according to reports. The Distressed and Credit Opportunities Fund will be managed by Chief Investment Officer Dimitry Griko, who has led Arkaim’s existing emerging markets high-yield corporate debt strategy since 2015, along with a five-member credit team.

The investment strategy of the new hedge fund will leverage the expertise used in Arkaim’s existing Emerging Markets High Yield Corporate Debt Fund. Despite being unlevered, long-only, and operating under daily liquidity constraints, this fund not only matches but often surpasses the performance of many distressed hedge funds in the market.

Similar to the UCITS fund, the new fund will focus strongly on downside valuation. This strategy involves assessing downside risks and enforcing recovery, both crucial components for managing a credit portfolio. Understanding and valuing recovery provide a safety buffer for performing positions and serve as the key profit driver for non-performing debt.

The Distressed and Credit Opportunities Fund’s investment strategy will include performing distressed debt, aiming to generate significant cash yield and overlap with the riskier part of the current UCITS Fund; non-performing debt, targeting returns through maximizing recovery of defaulted debt; and a credit long-short element, to maximize issuer selection alpha, provide a buffer against market fluctuations, and help reduce overall fund performance volatility

Verition appoints Millennium PM to macro role

Verition Fund Management, a multi-strategy, multi-manager hedge fund co-founded by Nick Maounis, has hired Priyanka Chatterjee as a Portfolio Manager with a focus on global macro trading, according to eFinancial Careers.

Chatterjee has joined Verition’s macro team in London. Before this, she spent 15 months as a macro Portfolio Manager at Millennium Management. Prior to her time at Millennium, she worked at Capula Investment Management for five and a half years. During her tenure there, she focused on global macro, equities, and FX trading, as noted on her LinkedIn profile.

Millennium taps Citadel researcher for PM role

Millennium Management, a leading multi-strategy hedge fund, has appointed Matthias Traut as a Portfolio Manager, as reported by eFinancial Careers. Traut was formerly the Head of European Research for Global Fixed Income and Macro at Citadel, a competitor.

Traut has been on gardening leave for the past year after resigning from his role at Citadel in August 2023, where he worked for over four years.

Before his time at Citadel, Traut served as a Senior Quantitative Economist at Tudor Investment Corporation for 18 months and spent eight and a half years at Brevan Howard as an economist.