Allocators have fallen in love with pod shops in recent years. The sales pitch of diversification, downside protection, and low volatility. Allocators have effectively outsourced having to deal with the talent in a talent-driven industry, at a great cost.

But many firms have also emerged in recent years at a time when the flagship funds of top multi-strategy firms like D.E. Shaw and Citadel have been closed to new money. There are around a dozen large multimanager platforms.

A defining characteristic is of course a focus on Sharpe ratios especially over long periods of time but you can’t eat Sharpe ratios in the same way as net returns and good investment performance both absolute and relative to the broader hedge fund industry and the risk free rate has been a major tailwind for pod shops over the last decade.

2020 was a particularly good year for the multimanager platform with numerous firms generating 20% net returns and since then with the exception of 2023, the industry has done pretty well on an absolute and relative basis.

But looking at 2026 net returns makes me wonder if the challenges facing pod shop platforms go beyond just generating sufficient scale?

In this piece I wanted to look at:

• The mediocre returns of the pod shop space this year,

• The Balyasny story,

• And does diversification work?

Mixed returns in 2026

The biggest alpha generation in the multi-manager space this year came from something completely un-pod-like with the Situational Awareness portfolio purchase. Citadel has always argued it is not a pod shop, and I have written extensively about how its level of centralization and collaboration (particularly in commodities) made it a very different beast in many ways from Millennium.

This year has also been characterized by strong double digit returns by some multi-strategy giants that have their DNA in systematic trading. Last week I wrote about D.E. Shaw which is now half systematic and half discretionary investing and a few months ago, I wrote about QRT which has become an aggressive external allocator to discretionary managers and is now moving into more discretionary investing in-house.

With Millennium hard to access, Citadel closed to new money and returning cash, and other firms like D.E. Shaw closed to new money in their flagship hedge funds; allocators have looked for new homes for their money in the multi-strategy space in the hope of finding the next Millennium or Citadel.

Tens of billions of dollars have been ploughed into multi-manager platforms like Balyasny, Schonfeld, Verition, Hudson Bay Capital and Walleye. Some other firms like macro fixed income specialist Brevan Howard have tried their hand at the multi-manager model with new funds.

One firm that doesn’t have the scale issues of Jain Global but arguably still takes too much of the gross returns for employees is Balyasny. It has tried to model itself as mini-Millennium but with a friendly family like Kumbaya, according to their PR spin. This has garnered favourable media coverage, but clients can’t eat media coverage.

Balyasny is broadly flat in 2026, a year in which the average hedge fund is up strongly. In the prior 2 years, the firm had averaged 15% returns. But in 2023, the firm only delivered a 2.7% net return. Consistency matters in this game, especially when bond yields are mid-single percentages.

Many of the newer, fast-growing multi-manager platforms are also struggling this year. Walleye was also flat for the year as of the end of July, and Verition is up around 3.5% as of the end of August.

Given the focus on Sharpe ratios and downside protection, no one would expect the space to see very high returns, but the premium generated to the risk-free rate is non-existent for many multi-managers platforms this year.

With so little to show for it and exorbitant cost structures, have we reached “peak pod shop”?

Allocators move slowly but will start asking questions eventually if they don’t see enough net returns, especially now that we are not in a zero or low interest rate environment.

The Balyasny story

The GFC made Balyasny. In a year when there was blood on the streets, Balyasny was flat. It became a major player in the hedge fund industry in the subsequent years. A poor run of investment performance saw Balyasny’s AUM crater in 2018, reaching a trough of around $6bn.

Balyasny made widespread changes and when returns improved, including a fantastic 33% return in 2020, money came flooding back. The chart below shows the stratospheric AUM growth. Balyasny’s headcount has more than trebled since then.

But in recent years Balyasny’s investment returns have been more mixed, underperforming Citadel, Millennium and Point72. One blemish was the mere 2.7% net return in 2023. Bloomberg estimated that the gross return that Balyasny had generated was around 15% that year, suggesting a pass-through expense of well over 10%.

What is noticeable about Balyasny’s year is that it appears to be struggling across the board – equities, fixed income and commodities.

It’s March drawdown was a multiple of that at other diversified multimanager platforms such as Millennium and Citadel. Moreover, although ExodusPoint was also down similarly, the latter has most of its risk in fixed income markets that were badly hit while Balyasny has the majority of its risk in equities typically. ExodusPoint is now up more than 6% for 2026. In August Balyasny has continued to underperform peers like Millennium, which was flat.

The above chart shows 2026 monthly net returns across the four largest multi-manager platforms, and the one below shows the relative performance of Balyasny versus Point72 over recent years. In 2026, Balyasny’s flat returns for the year compared with an average of over 10% for the other 3 firms. Earlier this year I wrote about the successful growth story of Point72, and today it manages around $58.5bn of AUM.

Did diversification work?

A major part of Balyasny’s re-building post 2018 was asset class and product diversification. The firm was known for its short-term trading in discretionary equities. Just as Jain Global launched with the ambitions of being a full suite pod shop covering every single asset class and geography, Balyasny wanted to have the breadth and depth of Millennium and Citadel.

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One adjacent and booming area is the world of systematic/quant hedge funds. A year ago, I wrote about D.E. Shaw, but the business has grown significantly since then.

D.E. Shaw’s website says, “ As of June 1, 2026, the D. E. Shaw group had more than $100 billion in investment and committed capital.”

The no or low-drama governing by managing committee at D.E. Shaw contrasts with the longstanding dispute at the top of Two Sigma, which hit the headlines again yesterday. This can’t be ignored but under the hood the team at the coalface at Two Sigma continues to deliver solid returns with extremely low volatility. The firm’s AUM also keeps hitting new records, reaching more than $80bn recently.

Then there is a relatively new kid on the block: QRT. It now manages more than $55bn of AUM and runs much higher leverage, more volatility, shorter duration, low latency trading and a growing Millennium-like external allocation programme.

The rapidly diverging business models make me wonder about our online habit of comparing their monthly and annual returns and the relevance of this. The story has similarities to the multi-manager space where in times of equity long/short outperformance Point72 outperforms while Citadel’s commodities exposure can be a boon or bane in any given year. This year was also notable as Citadel had lagged peers and not been as aggressive into the hyperscaler rally but was well positioned ahead for the inversion of that trade and ready to pounce.

Two Sigma’s founders of course worked at D.E. Shaw. But the latter has changed remarkably since then and is a sprawling multi-strategy firm today.

Would Two Sigma have also expanded, and would its performance be even better without the battle between the two founders?

Perhaps.

But in some ways its lack of expansion into discretionary investing is comforting at this time. Discretionary investing at D.E. Shaw is fundamentally different to most multimanager platforms in terms of centralization, collaboration, and how people are paid. Nevertheless, the pipeline at large quant funds where researchers finding signals are segregated from the portfolio management and execution functions creates in my view a level of IP or alpha at the firm that can’t walk out of the door in the same way it could if it was a pod at Millennium or a star trader at Brevan Howard.

With the decade long poor investment performance of RenTec’s hedge funds managing external capital, D.E. Shaw and Two Sigma remain the most storied systematic hedge funds. But in what ways are they different from each other today?

Returns and volatility

In the last few years D.E. Shaw’s returns skyrocketed ahead of their long run average both for the larger more diversified flagship composite fund and especially the more macro-focused multi-strategy fund. Two Sigma’s returns have lagged by comparison but looking at a broader peer group of Tier 1 large scale funds gives some perspective.

Given D.E. Shaw’s increasingly diversified business mix in the chart below (up to July 2026), I have compared both firms to the median of the 4 largest multi-manager platforms (Millennium, Citadel, Point72, Balyasny). Clearly, there are business mix differences, but they are all very much Sharpe ratio focused just like D.E. Shaw and Two Sigma. D.E. Shaw returns have of course been best-in-class, but Two Sigma’s returns also look solid.

Two Sigma's more systematic focus means that a comparison for them versus dedicated quant funds is just as relevant. QRT's performance of course stands out as I wrote earlier this year but Two Sigma has done well in comparison to others.

Over the past few decades, D.E. Shaw's Composite fund has averaged 13% returns, and the more macro-focused Oculus fund is nearer to 15% per year. But crucial to the sales pitch just as for the likes of Millennium and Citadel have been attractive Sharpe ratios. Since inception the D.E. Shaw's Composite fund has a Sharpe ratio of around 2x and the Oculus fund is nearer to 1.5x, both with low correlations to equity markets. The former has only had one down year, and the latter has never had a negative year, including a 7% positive return in 2008.

Two Sigma has a wider range of funds but also has a track record of very low volatility, attractive Sharpe ratios and low correlations to equity markets and the hedge fund industry.

How systematic are they?

D. E. Shaw recently launched its first ever pure discretionary fund, raising $5bn for it. The firm is famous for their systematic investing but has a long history of discretionary investing going back to 2002. By 2009, this was around one-third of D. E. Shaw’s AUM, and today it is half of the firm’s AUM. Discretionary investing can be seen across all the main hedge funds and private markets business.

D. E. Shaw’s credit teams in distressed and asset-backed securities are (as expected) largely discretionary, and the macro trading business started discretionary investing in 2004 as part of the Oculus launch. Today, macro discretionary investing is one of the largest areas of discretionary investing for D. E. Shaw with AUM of more than $10bn. It also has a much wider range of time horizons/holding periods (ranging from a few days to a few quarters) than the systematic futures trading business.

Just like Citadel, D. E. Shaw entered the energy market after the demise of Enron in 2001. It used data-driven discretionary strategies primarily in US natural gas but largely as a spread trader rather than taking large directional bets.

D. E. Shaw is not as meaningful a player in discretionary equities trading as the large multi-managers. It has a smaller fundamental equities team with more centralization, longer holding periods, and (often) focused on specific areas like event-driven or recently activist strategies, rather than having lots of industry-specific pods that trade daily.

This can be contrasted with Two Sigma that has stuck to its knitting in systematic investing with limited forays beyond. More than 90% of Two Sigma’s risk remains in systematic investing.

How big and diversified are they?

Looking at AUM, D.E. Shaw’s AUM of around $100bn is 25% larger than that of Two Sigma. The gap in terms of hedge fund AUM is likely to be smaller given the scale of D.E. Shaw’s public markets long only, and private markets AUM, which is likely to together be around $35bn.

The public markets long only business D.E. Shaw Investment Management (DESIM) moved more into factor investing and risk premia strategies in 2013, competing with the likes of market leader AQR. Two Sigma also has long only type of funds but with a narrower focus and scale. It’s Beta-1/ Active Extension funds are not more than $10bn in AUM.

D.E. Shaw expanded into private markets decades ago and has been active across the spectrum including venture capital, private equity and private credit. D.E. Shaw has recently followed Jane Street and other trading firms into leading funding rounds for private AI firms. It co-led the Series G funding round for Anthropic in February 2026.

Two Sigma hasn’t made the same forays into private markets. In public markets, not only is it a systematic firm rather than combination with discretionary, but its asset class mix is also not as broad. D.E. Shaw has a much larger proportion of their risk in macro trading than Two Sigma does.

One area that Two Sigma is more diversified in is the number of different offerings it has for clients. D.E. Shaw had a very high concentration of hedge fund AUM around the Composite and Oculus fund and is in the process of further rationalizing this by closing several smaller funds down and rolling investors into the bigger ones. By contrast, Two Sigma has a wide range of different hedge fund vehicles.

D.E. Shaw’s headcount is almost twice the size of Two Sigma reflecting this greater diversification and the huge 1,000 person team that the former has in India.

D.E. Shaw - Equities and Oculus

In recent years, D.E. Shaw has seen a marked outperformance by its more macro focused Oculus hedge fund. The chart below shows this.

Oculus has a combination of discretionary and systematic investing, so is more comparable to macro hedge funds than traditional systematic hedge funds. Macro, systematic futures and to a lesser extent energy trading were all crucial contributors to its strong investment performance this year.

Two Sigma does systematic macro investing and has traded commodity futures for more than two decades. But neither of these comes anywhere near to the scale of D. E. Shaw’s overall macro and energy trading footprint.

But one difference between Oculus and most macro hedge managers - that learnt their trade on fixed income proprietary trading desks in decades past – is asset class mix. Many macro hedge managers will be active in equity indexes, but the equities exposure of Oculus is likely much greater. My channel checks suggest that in 2026 equities have been a major contributor not just to the returns of the broader Composite Fund but also Oculus.

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In his autobiography decades ago Mike Bloomberg talked about the advantages of keeping his company private. Is this still true given its massive scale?

The media outlet Semafor reported last month that Bloomberg management had early discussions with investment bankers about an IPO or a strategic transaction. A Bloomberg spokesman later said that the firm had no IPO intentions and that its co-founder was happy with its private status.

This is part of ongoing speculation about the future of the firm beyond the cult like hero that is Mike Bloomberg. The assumption is that when he is no longer with us the charitable trust that takes over control of Bloomberg will look to crystalize value.

But a move from private ownership into life as a publicly listed company anytime in the next decade - whether under the watch of Mike Bloomberg or the charitable trust - would be a big mistake destroying long-term shareholder and customer value in my view.

An acquisition by a big tech giant like Microsoft has always been touted as a potential end game for the Bloomberg empire. These firms of course have the firepower to finance a deal and would bring AI and tech expertise to Bloomberg. But one shouldn’t forget that in most of their strategic alliances with financial services firms they are largely focused on selling as much compute as possible and may not care about nurturing the capital markets focused depth that has given Bloomberg such a formidable moat.

Earlier this year I wrote about how Bloomberg’s success was turbo-charged in its early days by a crucial strategic partnership How the Merrill Lynch deal made Bloomberg - by Rupak Ghose and about the depth of Bloomberg’s moat in the wake of the threat from AI as LLM giants like Anthropic launched a finance vertical https://rupakghose.substack.com/p/bloomberg-is-dead-long-live-bloomberg

Since then, the response of Bloomberg to these developments has diverged even more compared to others.

Competitors are willing to or need to share the prize with big tech.

Bloomberg wants to keep it all. Bloomberg needs to keep it all.

In this piece I wanted to look at 6 reasons that Bloomberg should stay a private company:

1. Most to gain and most to lose from AI disruption,

2. A slowing growth trajectory and most exposed to a financial bear market,

3. Intense competition from niche data players,

4. ICE MarketAxess tie-up and Tradeweb look for growth,

5. The industry is moving from an M&A binge to organic growth, and

6. Bloomberg is a product first company.

Bloomberg has the most to gain and the most to lose from AI disruption

Bloomberg has both the most to gain and the most to lose from AI disruption. It has the deepest moat by far amongst its peers but it is the most closed and vertically integrated model in the OTC data and trading platform universe. That drives its premium pricing and stickiness. It also creates a risk should that walled garden be unbundled.

What if an open world eats into Bloomberg’s competitive advantage?

Building in-house with ASKB rather than giving up distribution to OpenAI and Anthropic is the right strategy and recent improvements to the offering are notable. For all the talk of Bloomberg killers it is worth remember how much is available on the Bloomberg terminal but not currently used by the vast majority of customers. If ASKB could unlock this an LLM era may increase not reduce Bloomberg’s moat.

But the battle will be expensive and non-linear. This could create a contrast between rising capex and costs that are a major short term drag on Bloomberg’s financial metrics and the easier and cheaper path chosen by many of its competitors to partner with large tech companies.

It’s almost four years since LSEG announced its long-term strategic partnership with Microsoft. As the Generative AI drumbeat accelerated and share prices of publicly listed companies in the space got hammered, their management teams responded with a continuous flurry of announcements. Since then, all of the competitors in the space have announced partnerships with the likes of OpenAI and Anthropic to provide their data.

The pitch is simple. As Ben Jackson, President of Intercontinental Exchange said on its recent second quarter earnings call, “The answer to the view that a frontier model will commoditize software like ours: It has the direction backwards. The model is the commodity. The key is the governed network of record, its role-based permission map, and the behavioral data that only it holds, none of which a model owns and all of which it needs to be useful. AI does not shrink that advantage. It widens the surface area where our network creates value.”

This argument is constantly repeated by CEO after CEO in the data and analytics space not just in financial market data.

And the pain has been seen across a variety of other industry verticals. For instance, in legal data and analytics RELX and Thomson Reuters that own the two leading businesses have seen their share prices crushed in the last year while legal AI start-up Harvey has seen its valuation skyrocket with a current fund-raising round said to value the company at $15.5bn.

At this moment the threat to financial market data firms of disintermediation by LLMs is theoretical. Revenue growth across the peer group remains solid. For instance, in Q2 2026 ICE’s data business generated 8% revenue growth year on year above its long run growth rate.

But the risk is however that when and if the warning bells appear around disintermediation, then it will be too late to shift course. The challenge for building as a public company is that such course corrections and their costs are in full glare of the public. As much as sunk financial costs, the threat for publicly listed companies in the space is reputational damage having been forced into making bullish statements to shareholders previously.

The added element here is that the strategic partners at the table are few and could be fewer in the future. The likes of OpenAI and Anthropic are partnering with everyone in the space, making previous announcements that are made to sound unique partnerships appear increasingly commoditised.

Bloomberg’s advantage is that it can build quietly without disclosing any financial information around costs and revenue, and it can use adoption metrics selectively for marketing rather than having to feed public investors constantly.

A slowing growth trajectory and most exposed to a financial bear market

A Bloomberg IPO would be a big event for Wall Street. It would garner a huge valuation as a public company and its brand strength would likely mean that it would start out trading at a premium valuation multiple relative to the peer group.

But markets are fickle and care most about financial metrics.

Unlike firms I have written about a lot in this newsletter like Jane Street and Hudson River Trading that are private but have financial performance data leak out owing to reporting to debt holders, Bloomberg doesn’t issue debt and its financial performance is not disclosed regularly. Most media coverage focuses on estimated revenues. This is typically a good proxy as the vast majority of revenues come from the Bloomberg terminal that rarely discount fees. But terminal numbers are not reported regularly on a systematic basis. Moreover, it is harder to track non-terminal revenues that have over time become an increasing part of the group.

Nevertheless, Bloomberg’s revenue growth has slowed. I wrote earlier this year that “In the decade 2001–2011, group revenues grew at 10% per year and in the following decade the pace halved.” I also noted that more recently Bloomberg has benefited from some decent price increases given it has a long-term policy of adjusting terminal pricing in line with inflation.

But it is hard to imagine that it has outgrown a publicly listed peer group.

FT Alphaville looked into this last month on the back of fresh data from BCG Expand. The chart below illustrates Bloomberg’s dominance in the pure financial market data and analytics space.

FT Alphaville noted that BCG Expand’s estimate of $14.4bn of Blomberg revenue in 2025 compared with an estimate from Burton-Taylor of $11.6bn in 2021. This would imply a revenue CAGR of just over 5% in line with larger competitors but slightly below BCG Expand’s estimate for the overall industry of a 7% revenue growth CAGR for the period.

The data is also unsurprising given terminal revenues across the industry have lagged the faster high single digit percentage revenue growth in Indices, Analytics, Pricing and Reference data. Bloomberg has a footprint across all these areas but the mix towards the all-in terminal bundle has been a drag.

Profitability metrics for Bloomberg are even more well-guarded than revenue growth. The business model should be very profitable and the firm has generated tens of billions of dollars for Bloomberg Philanthropy over the last few years. However, the huge cost base of Bloomberg News is likely a drag on profitability and it is notable that firms like S&P Global make substantially higher operating margins in their ratings and index businesses than in financial market data.

The risk is also as I have written in the past that if and when the bull market ends and headcount in the capital markets industry shrinks, Bloomberg may be more exposed than peers. Have you ever met a hedge fund or bank trader using anything but a Bloomberg screen?

Bloomberg’s customer base is more than just those users but it is notable that the financial market data industry did contract after the years following 9/11 and the GFC albeit bouncing as the next bull market built. As I noted in my last piece on the firm: “Like a swimming pool, there is a deep end and a shallow end to Bloomberg’s moat.” The risk particularly if we had a sustained bear market is that the tools and technology exist today in a way they didn’t in the past for customers in the shallow end (e.g. outside of fixed income trading) to substitute their very expensive Bloomberg terminals.

Intense competition from niche data players

The BCG Expand highlighted that the fastest growth (and consequently market share gains) in the industry have come from the more than thousand smaller firms. The earlier chart shows that the “other” category generated $12bn of revenues in 2025. That includes long established brands like Argus Media in energy data but also newer firms.

Despite the collapse in public market investor sentiment around the financial data infrastructure industry, fund raising and valuations in the private markets remain robust. This is not unique to this sector and often the private markets lag the public ones. But in many cases, these are firms with faster growth catering to new emerging areas or attacking an existing area in a slightly different way.

The most obvious area is private markets data where large firms have paid up to get access to the niche. In June 2024 Blackrock agreed to acquire Preqin, a leading independent private markets data for $3.2 billion. This was 14x revenues or 69x adjusted EBITDA. S&P Global acquired With Intelligence for $1.8bn, and IHS Markit that is now part of S&P Global also made expensive purchases in this space earlier. In recent weeks Bloomberg followed the trend of expansion into private markets data and tools with the estimated $0.8-0.9bn deal for Canoe Intelligence.

But there are also firms that created niches reinventing data for equity and debt markets. AlphaSense recently completed a funding round that saw its valuation almost double from $4bn in 2024 to $7.5bn today.

Credit data intelligence firms with deep focus on leveraged finance, private credit, distressed debt and restructuring that cater to not just investors and bankers but also lawyers have been booming. Some started collecting court filings and sending journalists to court hearings but they are pivoting hard to AI backed by plentiful private capital.

Octus (formerly known as Reorg) has seen its valuation increase from $1.3bn in 2022 to around $4bn currently and its smaller rival 9fin which was valued at $500m in December 2024 completed a large fund-raising round at a $1.3bn valuation 4 months ago.

There are other asset classes where new firms are redefining the data available and building very sticky must-have platforms. Kpler started in LNG data over a decade ago and the global physical trade and maritime intelligence platform was recently valued at almost $4bn in a major fund-raising round.

These firms may be small compared to Bloomberg’s more than $14bn of annual revenues but they are growing very fast and well-funded. More than the larger well-known publicly listed peers they are the ones that have eaten away at Bloomberg’s domination of the data space.

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It was 3am in the morning on Friday/Saturday night UK time when I quickly wrote the title for my last piece in response to the FT’s fantastic scoop on Jane Street’s huge loss in July (and even larger profit in Q2).

I had used the term a few months earlier as well in April when I wrote…https://rupakghose.substack.com/p/is-jane-street-the-best-hedge-fund

I had assumed readers would all understand that this was a directional shorthand way to highlight their gradual shift towards:

• more directional exposure,

• holding positions for longer,

• and running a huge balance sheet like the largest hedge funds.

But I wanted to come back to this topic as I have read quite a lot of commentary on social media on this. Some of these people may have read the whole piece (even the paywall section) but I fear many just looked at the headlines.

Bloomberg wrote last night a piece on the topic and based on their channel checks seem to agree with me.

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Reading the FT break the news that Jane Street had lost a staggering $15bn in July there can be only one conclusion – they are definitely a hedge fund nowadays with a market maker attached albeit one that has 10-20% market shares across many of the largest financial markets in the world.

If I am right that they are a hedge fund, could I be equally wrong that they are within the zip code of “the best”?

Perhaps.

But reading through the coverage suggests that they more than doubled their record Q1 2026 revenues of $16bn in Q2 2026. The media reported $40bn of revenues year to date even after including their July losses. Given Jane Street’s traditionally high levels of profitability (2025 EBITDA margins were above 75%) and then taxing this and comparing it to the equity base at the end of 2025 of more than $50bn would give another year of staggering returns.

I wrote earlier this year “If there was any doubt I had about whether Jane Street likes to punt and take directional bets the huge amount of detail in the SEBI report on the Indian options scandal dealt with that.”

What is clear though is that the level of risk that Jane Street is running is higher than what any of us thought. I used to consider Jane Street a composite of the Citadel family (LLC and Securities that are run separately but majority owned by Ken Griffin). However, it is hard to imagine Citadel the hedge fund losing 20% in a given month and Citadel Securities not make any money that same month.

The highs and lows we have seen over the last year suggest a higher-octane version with much greater risk appetite almost a throwback to legendary macro managers of a prior era.

There are two bits of context though on the “Is Jane Street the best hedge fund in the world.” Firstly, Bloomberg reported that this was Jane Street’s first monthly loss in a decade highlighting the rareness of this event. Secondly, the underlying losses in Jane Street’s trading desks was much less. The WSJ reported that Jane Street had invested $2.5bn with Situational Awareness that had risen to $10bn at the peak and that declined to $3bn by the end of July so drove almost half of the $15bn of losses.

Which bring me to the title of this piece. Jane Street is a hedge fund, stop calling it a market maker.

In this piece I will go over each of the following areas:

• The market making pie may be too small for Jane Street,

• Jane Street expands firepower,

• Why Jane Street wants privacy, and

• Jane Street is bigger than the sum of its parts.

The flow market making pie may be too small for Jane Street

Jane Street’s market making franchise is huge. In the US this is more than 20% in ETFs and 10% in equity options and cash equities. Then there are international markets and areas like credit trading where ETFs have proved to be a trojan horse.

With the explosion of Jane Street’s revenues, the percentage it generates from market making is likely to have shrunk materially in recent years. Probably a good benchmark here is Citadel Securities that made $12bn of revenues last year. Although its US ETF market share is half of Jane Street’s and revenue capture even lower given Jane Street’s dominance of more complex and fixed income ETFs, Citadel Securities equities and equity options market shares remain several times higher than Jane Street’s.

Last year Jane Street made almost as much revenues as Citadel Securities, HRT, XTX, Optiver, IMC and Virtu put together. This includes proprietary trading revenues for these firms as well as market making and a footprint in macro trading and international options markets that Jane Street has less depth in.

Although the expansion of market making in adjacent asset classes has been a major success story, it drives a small year on year swing for a firm that generated $40bn of revenues so far this year. A good example is credit trading where I have written in the past about how the combination of electronic trading, ETFs and portfolio trading has allowed Jane Street to eat the lunch of the banks that traditionally dominated the space.

Crisil Coalition Greenwich estimates that G10 credit trading revenues across the banks declined from $7.5bn in 2021 to $5.2bn last year. Moreover, it estimated that in H1 2026 this was $3bn, only a circa 10% increase year on year. Even if we assumed that Jane Street had made such material inroads to be 20% of the overall bank wallet share, this would be $1bn of G10 credit trading revenues for it last year. Even adding emerging markets and other adjacencies it is hard to see that market making in credit alone is anything but a small contributor to Jane Street’s overall revenues.

Jane Street expands firepower

This week Jane Street refinanced $11.1 of existing debt and expanded this to a $14.6bn debt raise including 3 different maturities. The funds raised almost exactly match the July losses. On the use of proceeds S&P ratings said this was trading capital to support expansion of trading operations and Fitch Ratings added that it would also be funding technology infrastructure investments.

S&P wrote “The additional stable funding should help keep the ratio of required margins to net trading capital and the gross stable funding ratio supportive of the current ratings, despite the rapid growth of the balance sheet.” Both rating agencies noted Jane Street’s strong retained earnings growth.

Although gross leverage is a crude metric, its development over the years is one useful sanity check on the amount of incremental exposure that Jane Street is taking on. According to Fitch, Jane Street’s balance sheet leverage ratio on March 31 2022, was 6.9 times – well below the benchmark for investment bank trading firms of 15 times. It estimated that it had fallen to 6.2 times later that year and in late 2023 and early 2024 was below six times. This week Fitch wrote “Although corporate debt is likely to increase, balance sheet leverage should remain well contained relative to the 1Q26 level of at 6.2x and Fitch’s leverage downgrade trigger of 10x. This reflects the firm’s large capital base, which remains supported by strong earnings generation and modest capital distributions.”

Why privacy matters to Jane Street

The July losses are likely to have made this debt refinancing tougher. The move to private credit was also supposed to help with privacy. Unfortunately for Jane Street the information around trading losses leaked out to in the process.

But how much would you pay for privacy? Through the history of humankind, the wealthy and famous have always been happy to pay a premium for services that give discretion and anonymity.

On the face of it the increased costs of Jane Street’s new debt in terms of spread over US Treasuries looks massive. The always thoughtful Toby Nangle from FT Alphaville does a surgical breakdown of this and calculates that this is an extra $200m in a one-off payment and more than $200m every year in annual interest costs for the issuer.

But for Jane Street this increase in annual interest payments is equivalent to only around one day of its revenues. It may just be a cost worth paying for a firm in an intensively competitive industry reliant on information asymmetries.

I have written about Jane Street more than 10 times in the last 3 years here on Substack and in traditional media. 3 years ago, it was exotic to write about them but more eyes are focused on them today given their growth in revenue and regularity of information disclosure on this. Not all the coverage is positive. A few of us felt they had gone too far in Indian options and I was pretty vocal on this in the days following SEBI’s initial report.

As Jane Street has got larger in many ways it became opaquer. The firm engaged in specific PR like profiling its “deep tech” credentials including showcasing its GPU arsenal on top tech podcasts but does little more than the fluffy stuff.

I used to periodically see Jane Street bond prospectuses outlining market shares, volume data and growth areas. As revenue has surged the granularity around how it makes that money has reduced. When you make billions of dollars in aggressive proprietary trading strategies as they did in Indian equity options you want to be as under the radar as possible. The shift towards longer term and larger bets also necessitates less disclosure on this for competitive reasons.

If there were any doubts then the front pages headlines of the July $15bn losses make it understandable that a firm minting billions as fast Jane Street would want to stem the flow of information on its results. I am not sure they will succeed as we saw in recent days. The firm finds itself in this delicate balancing act of staying out of the spotlight but having enough brand strength to attract the kind of increasingly techie talent it needs.

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“I think when I was growing up, I--my aspiration was to own a house on Sydney Harbor. And I grew up in a bad suburb, in a great city, and I guess the name of my firm is the street of the house--I ended up buying a house in on Sydney Harbor with my first meaningful bonus. I think we all need to be driven by a goal, I guess, at some point.” Greg Coffey at Sohn Conference 2024

It’s 20 years since Greg Coffey became a superstar of the hedge fund world with eye-watering returns. But a very different Coffey - less high octane, more consistent - has become an asset gathering machine hitting an AUM level of around $20bn similar to more storied macro hedge funds. This year in a tougher year for discretionary macro according to With Intelligence he has delivered an impressive 17%+ net return to date.

Young Greg

When Greg Coffey retired from the hedge fund industry in 2012, he was only 41 years old. His c.8-year run had garnered media headlines as much for his high-profile departure from GLG and then joining Moore Capital as macro legend Louis Bacon’s right-hand man as anything else.

Coffey averaged impressive 20-25% returns per year over that period. But the big question that separated him from the greats of macro investing is: how would Coffey have navigated the GFC if he hadn’t been out of the market?

By contrast, the GFC cemented the legend of Alan Howard and Chris Rokos who both individually generated outstanding returns through the crisis years.

Although I have never worked in the world of emerging markets, I was familiar with Coffey’s run (as well as the other issues at GLG) having spent time with people right at the top of GLG during those days.

GLG was listed on the NYSE by reversing into a SPAC in 2007. It was relatively unknown in the US but for anyone in European equities like me it was one of the masters of the universe alternating between Marshall Wace and Fidelity as the largest commission payer of investment bank European equities franchises.

When Coffey abruptly resigned in April 2008, he was managing $7bn of GLG’s $24bn of AUM. He had also contributed around half of the firm’s performance fees in the prior year (some sources pegged this even higher).

It was also notable as GLG had been recovering from the departure of Philip Jabre a few years earlier. Jabre had been a star manager running GLG’s large market neutral fund and had become embroiled in a trading scandal, which eventually led to regulatory investigations and fines for both Jabre and GLG.

Coffey’s rise had been nothing short of meteoric with returns of more than 60% per year between the start of 2004 and end of 2007. This garnered him the nickname, the Wizard of Oz.

But his GLG Emerging Markets Fund was down double digits in early 2008 ahead of his resignation and critics claim that he would have got crushed in the GFC given his risk-on stance.

To Coffey’s defence he was an aggressive day-trader and may have re-positioned his portfolio if still trading ahead of the GFC.

That said, a significant part of Coffey’s investments was in illiquid positions that he passed on to his successors. Unsurprisingly, those bled out through the GFC causing the GLG Emerging Markets Fund significant damage. The Financial Times had a rather entertaining story in 2020 of the last sale of one of those positions.

This combined with the impact of the GFC on industry fund raising must have played on Coffey’s mind when he decided not to go out fund raising for his own hedge fund but joined Moore Capital as co-CIO of Europe. There was press coverage at the time of Louis Bacon lauding Coffey as one of the finest investors in the world.

But the world had changed and against a tougher backdrop for Emerging Markets macro, Coffey struggled at Moore. By the time he retired in 2012 most of the AUM of his Moore Capital fund had disappeared following several years of single digit returns.

Mature Greg

In 2018 Greg Coffey raised $2bn for a new hedge fund. Kirkoswald, was named after the Sydney road that Coffey had bought a mansion on.

Coffey has been under the radar but relatively consistent with an average of 17% net returns since 2018. The only weak point was flat returns in 2023 and 9% in 2024. But last year he was up 21% in a very good environment for discretionary macro managers, particularly those focused on emerging markets.

This year while many discretionary macro managers have struggled (albeit emerging markets ones less so) Coffey’s Kirkoswald macro hedge fund has thrived. According to With Intelligence in 2026 it was up by a stellar 17% as of the end of July.

Read on for more on Coffey’s new firm….

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The World Cup got me thinking about some of the best teams in history to have never won it. Some reflect on the Brazil team of 1982 but I always think of the fantastic Dutch team of the 1970s. Led by legendary Johan Cruyff they played a revolutionary style known as “Total Football,” and the Cruyff turn became one of the game’s most iconic moves.

The shift away from pure high frequency trading is seeing all the players in the professional trading firm (PTF) world overlapping more and more. Can the Dutch trading firms ever compete like Cruyff and his teammates did?

The big are getting bigger in the PTF world. Scale has advantages. The ability to dominate distribution networks. The ability to price and hedge across financial instruments and asset classes. The ability to invest in large new opportunities and hire the best talent to do it.

The top 3 firms: Jane Street, Citadel Securities and Hudson River Trading together generate more than $65 billion of annual revenues and have a combined equity capital base of around $100 billion!

But they are not alone - there are another 10 or so firms that I would include in an elite super league of the industry including Jump Trading, DRW, Tower Research, Susquehanna, G-Research, XTX Markets, Virtu, Quadrature and the two Dutch options giants – Optiver and IMC Trading.

As I wrote in The Traders of Amsterdam the Dutch equity options market has a rich history and has been one of most vibrant in Europe going back several decades.

The hardest job in the trading industry

Against this backdrop of a super league of PTF giants, Thomas Spitz has the hardest job in the PTF and nonbank market making world - turning around Flow Traders, a firm definitely nowhere near that super league.

At its recent Investor Day, Flow Traders announced a target of €1bn in revenues by 2030. That number might sound familiar as it was the target they gave at the 2022 Investor Day for 2026 revenues. Not only have they dramatically missed this target, they have done it at a time when the competitors are printing money.

A few years ago in Why Jane Street wins and keeps winning over and over again I referred to Jane Street as the Amazon com of the industry and Flow Traders it’s one time competitor as more like Poundland, the rather scruffy British discount retailer, usually found in dodgy or low-income neighbourhoods.

In 2020, Jane Street’s revenue was around 10x larger than Flow Traders. By 2025, this gap was a gigantic 73x. This year the gap will be even greater.

The good news is that unlike others before him the newish CEO realizes that Flow Traders is the burning platform - a house on fire.

At its recent Investor Day, he admitted the company had lost its way by trying to do too many things, most of them not very well. He acknowledged that despite a decent market share in European ETF market making the trend over the medium term even in this core product has been downward.

He wants to focus. Deploy more capital but focus it on its core ETF business and to venture more into the world of slightly longer duration systematic proprietary trading, where the likes of Jane Street - the best hedge fund in the world - have made ungodly amounts of money.

He is right.

But the bad news is that it may be too late already for Flow Traders.

The competitors have just got too big and powerful and they keep getting bigger.

They attract the best talent. They have far superior technology and distribution.

And then there is the not so small matter that “geography is destiny”, as they say. Flow Traders is largely a European business with limited exposure to much larger and faster growing fee pools in the US and Asia.

To be true, there are businesses like XTX Markets that have made a truck load of cash from areas like European cash equities. By contrast, Flow Traders market share in European ETFs declined from 35-40% in the 2018-2022 period to just over 25% today.

In addition, Flow Traders expansion outside of Europe over the last decade has been nothing short of a disaster. This contrasts with the success that their Dutch peers have seen in targeted niches in the US and Asia.

Nothing in the recent Flow Traders Investor Day told us what their “edge” was though. 10 years ago, the firm had a right to play. Today it is hard to see how it could attract and retain the necessary talent in the most competitive hiring market for quant and tech talent in history. They are not just competing with the PTFs but giants of the hedge fund industry.

Am I the only one so sceptical about how Flow Traders could succeed in a turnaround?

Mr. Market suggests I am not.

The stock price of Flow Traders has fallen 25% over the last 5 years and is barely up this year. Meanwhile laggard Virtu – which has been losing out to Jane Street, HRT and Citadel Securities - has seen its share price rise by 125% in the last 5 years and 78% this year.

ETF Stream gave a balanced and fair take on Flow Traders recent Investor Day: “But there will be scepticism aplenty given the intense competition from Jane Street and others, as well as a track record of disappointment that long pre-dates the current management team. The greater use of directional risk adds to the uncertainty.”

Sell side analysts at ING wrote, “I think positioning has been eroded by the bigger players who have more capital but more importantly better trading algorithms,” while ABN Amro analysts told ETF Stream “Directional trading lifts the risk profile and investors will demand higher returns as a result… We agree the setup needs a shake-up, but Flow Traders has limited quantitative pedigree and native infrastructure. That makes this a call option not a growth engine, in our view.”

Spitz held senior roles like running trading at Credit Agricole but it isn’t obvious that he himself has the systematic trading track record of those who have built top tier firms like Peng Zhao at Citadel Securities or Alex Gerko at XTX Markets. He could be a great conductor of the orchestra but there is no sense that Flow Traders still has an orchestra to conduct.

Flow Traders 2026 performance lags peer group

Just like other markets, ETF industry-wide trading volumes have surged in 2026 but Flow Traders lagged once again. In Europe and the US Flow Traders ETF trading volumes grew with the overall market but its revenue capture was weak and trading revenues lagged volumes. More significantly, H1 2026 was characterized by record activity levels and revenues for the investment banks in APAC and regional ETF market trading volumes more than doubled. By contrast, Flow Traders activity levels in APAC were flat year-on-year. The decline in crypto valuations also impacted digital assets trading volumes across the market and for Flow Traders.

The continued underperformance in ETFs, lack of product innovation and the downturn in crypto markets resulted in negligible revenue growth for Flow Traders in a first half when investment banks and PTF peers were seeing a surge in revenue and profits. As the table below illustrates Flow Traders profits barely grew in one of the hottest trading markets in history.

Flow Traders have ambitions of using more capital in trading but organic cash generation is woeful given the lack of growth in recent years. At the end of Q2 2026 it had trading capital of €1.15bn a tiny fraction of what competitors are able to deploy. Second half fixed costs are expected to be line with the first but given seasonality and some normalization revenues are likely to be much lower driving a substantial half on half decline in profits.

Time to sell – creating a Dutch giant

Given the high degree of competition, Flow Traders is running out of time. The best solution may be for Flow Traders to be acquired by one of the two larger Amsterdam peers - Optiver or IMC Trading. The firm had been founded by ex-Optiver employees in 2004.

With a current market capitalization of €1.2bn, even with a takeover premium a deal would be easily affordable for Optiver or IMC Trading. Beyond their billions of organic cash flow generation, at the end of 2025 the equity base of Optiver was €5.4bn and for IMC Trading it was $2.58bn.

US competitors including Jane Street, Citadel Securities and Jump Trading have tapped the bond markets in recent years and given the strong profit profile and scale of Optiver and IMC Trading there is no reason why they couldn’t do the same.

Flow Traders current market cap is around the same as its trading capital and slightly above the firm’s shareholder equity of €970m at the end of H1 2026. Even assuming a sharp decline in the second half from the €91.2m of net income in the first half, the valuation is very low. Any takeover premium to the 2026E PE multiple for Flow Traders of 7-8x would be negated by significant cost savings potential.

A Dutch solution would also have far fewer cultural issues than a deal with a large US nonbank trading firm or even a slow moving and bureaucratic European bank.

On the face of it both Optiver and IMC Trading are doing well. Optiver and IMC Trading 2025 revenues are up 42% and 90% respectively versus 2020, while Flow Traders revenues have almost halved. This was an exceptionally strong year for Flow Traders, so a comparison versus 2019 or 2021 is probably more relevant. Relative to the latter, Optiver and IMC Trading have doubled in revenues while Flow Traders has only grown 27%. I was unable to find IMC Trading revenues for 2019, but Optiver’s revenue is up fourfold while Flow Traders’ revenues have doubled.

But 2025 revenues of €4.5bn for Optiver and €2.7bn for IMC Trading are dwarfed by US competitors. The productivity in terms of revenue per head of the three Dutch firms also lag market leading firms.

Optiver and IMC Trading both offer compelling synergy opportunities in a combination with Flow Traders. But the former has much more overlap with Flow Traders current business.

Read on for more detailing potential product synergies, cost synergies and moving up the value chain….

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“The biggest investor in our funds is my partners and myself. So, we think that you should always look for, in the hedge fund community, like, what is the alignment that you have with the GP? Are they in the asset management business? Or are they in the performance business?” Ken Griffin at GS June 2026

Its World Make Fun of Leopold Day on social media. But I wonder if the more interesting angle is really about market structure and Citadel?

The fact that Leopold was running a highly concentrated leveraged high beta portfolio that could get margin called was well known. It happened. The early investors in his fund may still have great returns (largely because of the Anthropic stake). The later ones not so much, but ask anyone who has invested with most star managers and that is not a unique situation.

The Situational Awareness prime brokers - Goldman Sachs, Bank of America and JP Morgan - were probably even more cautious or aggressive depending on which side of the table you sit on given the experience of the sector with Archegos. You may remember that was Bill Hwang’s family office that started the run on Credit Suisse. One thing that fell through the cracks at the time was that Goldman Sachs were as lucky as they were smart in that example in not taking significant losses.

Wall Street is the buyer of last resort

Silicon Valley and not Wall Street is the centre of the world we live in not just because of ideas and innovation but money. Trillion-dollar companies, huge venture capital firms and billionaire angel investors (and one former trillionaire). That is why all of us outside were surprised to see how Silicon Valley Bank went down.

The fall of Leopold’s Situational Awareness was just as quick. It made me wonder where were his friends and mentors? This was a man marrying the chief of staff of Anthropic, close friends with other Silicon Valley wonderkid favourites like podcaster Dwarkesh Patel and with anchor initial investors like the Collison Brothers. The gods of Silicon Valley had been inspired by his vision.

Citrini wrote “Imagine, for a moment, you are an LP in Situational Awareness. The fund that launched on a pitch that was essentially “AI is the only thing that matters…And you invested….because you think Leopold is uniquely situated as being one of/knowing “the few hundred people” who will bring about Machine God before 2030.

Then over the next two years, the fund did exactly what it said it would. And it went up. By, like, twenty something times if I’m remembering properly……

Now those stocks go down, so the fund goes down.

Let me ask you - do these LPs seem like the type of people that are going to become bearish on AI because SK Hynix got cut in half in six weeks?….I think it’s probable the LPs will BTFD. Situational Awareness is going to get the money they’re asking for….

I don’t think @leopoldasch is in trouble so much as he’s likely to raise the capital he’s asking for…”

But in the end it was Wall Street that stepped in. Citadel beat out Millennium and Jane Street in the auction of the bulk of the Situational Awareness’ public stock portfolio.

Even in a distressed fire sale pushed through by prime brokers this would have been a large multi-billion portfolio sale. Not only was it huge, it was a complex group of stocks to take a view on and the buyers had to move quickly with no time to do detailed deep-dives or raise financing.

In summary, the buyers had to have everything in place before the idea of the transaction came up - deep stock knowledge, risk management and financing.

When a bank becomes distressed - despite the huge number of other banks - the actual short list of potential buyers that ticks all the boxes is usually quite limited.

Often, it comes down to one firm, JP Morgan.

In a similar way, when there are fire sales of distressed public financial assets, the theoretical list of hedge funds that can take on these positions is long.

But one name - Citadel - keeps appearing just like JP Morgan.

And its leader Ken Griffin is almost as famous as Jamie Dimon.

Same movie, different era

Citadel has a long history of pouncing opportunistically when other hedge funds are in distress. There are several examples like Sowood that come to mind. But it’s almost 20 years since Citadel conducted probably its most famous buy from a distressed hedge fund. Amaranth Advisors blew up on concentrated natural gas bets in September 2006. It couldn’t meet margin calls and was forced to pay (it’s clearer) JP Morgan and Citadel $2.15 billion to take on its remaining energy trades. JP Morgan sold its part of the acquired energy book to Citadel, which was a bigger winner.

The below extract from Institutional Investor Magazine at the time tells the story…

The strength of Citadel

Citadel’s overall investment returns in 2025 and H1 2026 had been mixed but its fundamental equities (discretionary stock picking) returns had been a relative bright spot. My channel checks suggest that Citadel is likely to have weathered July better than some of its peers. The combination of deep-domain knowledge, world-class risk management pedigree and financing strength allowed Citadel to move quickly.

Citadel is not centralized with a star manager like Rokos but it is not a federation of different silos like Millennium. Out of the multi-manager platforms it is by far the most centralized. PMs that don’t perform are out quickly but idea sharing is encouraged whereas it is frowned upon at Millennium. It also has a large central risk book that monitors PM positions adding to them and hedging them. Citadel has long talked about the quality and quantity of its central risk infrastructure - talent, data and capital allocation - as key differentiators.

I recently wrote about how Millennium has been growing its AUM much faster than Citadel. Bloomberg recently reported that Millennium is looking to raise another $20 billion from clients. By contrast, Citadel has been shrinking its AUM by returning tens of billions of dollars to its clients.

But much of Millennium’s growth in terms of AUM is farmed out to external managers. Many of the larger external funds like Symmetry, WorldQuant and Taula are running high amounts of leverage given their fixed income relative value and quant strategies.

At the same time, although Citadel is well known as focusing on market-neutral alpha generation it has always run with greater risk appetite than peers. It doesn’t have the strict risk limits like Millennium. Its flagship franchise is in commodities - spanning both financial and physical trading areas - where rigid risk limits don’t work as well as in equities and fixed income. Since its inception it has delivered higher investment returns than Millennium but with greater volatility of returns.

In summary, the firm is willing to take directional bets when high conviction and not obsessed with hedging all of its exposures to markets and factors.

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Singapore’s GIC to invest an additional $30 billion in hedge funds | Reuters

GIC manages around $1 trillion and currently allocates around $15 billion to hedge funds so an additional allocation of $30 billion over the next 3 years is a significant move. The last time we heard about GIC’s hedge fund allocations was a redemption of $250 million from Jain Global six months ago. They had also replaced the head of the external managers team focused on hedge funds. There had previously been rumours that they had been shrinking their hedge fund portfolio.

Only a few weeks earlier, Bloomberg reported that Abu Dhabi Investment Council (ADIC) a $160 billion arm of Mubadala was looking to build exposure of $15 billion to hedge funds, with a focus on multi-strategy firms and that ADIC was one of the investors in a $2 billion fund raising round by ExodusPoint. ADIC had also recently allocated $1 billion to macro hedge fund, Deem Global.

ADIC’s CIO for hedge funds told Bloomberg “Hedge Funds have consistently performed well within ADIC’s portfolio” and there is “value in strategies that can provide diversification, downside protection, and attractive risk-adjusted returns across market cycles.” The latter echoed what GIC had been saying.

Sister fund ADIA has also been focusing on multi-strategy and quant hedge funds for several years now as well as equity long/short managers.

SWFs have a long history of being large allocators to top multi-strategy, macro and quant hedge funds like Bridgewater, Citadel and D.E. Shaw. My channel checks suggest that so far the latest expansion of SWF allocations into hedge funds has been incremental rather than dramatic.

But the experience of private markets was that allocations became concentrated with a few larger firms like Blackstone, KKR, Brookfield and Apollo over time. As much as investment returns, brand and the ability of a GP to take on very large allocations were critical to this.

A trillion-dollar SWF doesn’t want to take risks with unknown commodities, without brand value. Neither do they have the time, resources or appetite to make hundreds of small allocations. In fact, having funds like Millennium sit in between and be the allocator to new funds suits SWFs.

For GPs the deep pockets of SWFs make them attractive long-term strategic partners, particularly at a time that top hedge funds are extending the duration of lock up’s on their capital base.

So, it is unsurprising that SWFs and large hedge fund platforms are looking to deepen their relationships. In this piece I start with looking at Ray Dalio who was the first hedge fund manager with deep SWF ties, then I look at the size of the prize, how SWFs are using managed accounts and evidence from SWFs on which hedge funds they are allocating to.

Spoiler Alert: many of the firms I have written about in the last year come up on these lists!

Ray Dalio – the SWF pioneer

Bridgewater founder Ray Dalio first visited China on work in 1984 and was reported to have been an informal adviser to Chinese regulators by the late eighties. Bridgewater had strong ties to Chinese government linked institutions including the SWF CIC (China Investment Corporation) and SAFE (State Administration of Foreign Exchange). In the book “The Fund” Rob Copeland wrote “Ray Dalio was mentally captured by the Chinese Communist Party when China’s SAFE (state-owned currency administrator) invested over $5 billion in Ray’s [fund].”

More recently, another major Bridgewater SWF client the Brunei Investment Agency (BIA) redeemed some of the money it had in Bridgewater funds, and used those proceeds to acquire a 20% stake in Bridgewater the firm.

Another SWF shareholder but with a much smaller stake in Bridgewater is GIC, which has been a client of the firm for several decades. In late 2024, the two firms did a podcast where they celebrated 30 years of partnership.

GIC and Bridgewater Identify Major Issues Facing Investors in the Years Ahead | GIC ThinkSpace

Where is the money – SWFs today

SWFs as a group have only traditionally allocated around 2% of their AUM to hedge funds with that in the process of rising towards 3% in recent years. But with SWF’s having AUM of around $15 trillion in aggregate, this could still equate to 6-10% of all hedge fund AUM.

More importantly, the SWF industry total is mostly heavily concentrated around China, UAE, Saudi Arabia, Qatar, Kuwait, Norway and Singapore. The numbers from each of these funds can still be huge. As well as the size of each of SWF just as important is how much of that it gives out to external managers and in which asset classes and investment styles. For instance, Norges Bank Investment Management (NBIM) allocates materially less externally than most other giant SWFs, and specifically very rarely if ever to hedge funds.

For hedge funds the largest allocator is ADIA in first place. With GIC’s latest move it will likely be in second place very soon. GIC’s sister firm Temasek that manages around US$400 billion has traditionally allocated less to hedge funds but is also in the process of looking to expand its hedge fund allocations. Temasek has previously stated that it currently allocates to around 10 major global hedge funds including Citadel.

The rise of SWF managed accounts

Just as the likes of Millennium have grown their external allocations using separately managed accounts (SMAs) that give them direct visibility and control, we are seeing the largest SWF allocators also look for this. With Intelligence reported more than eighteen months ago that this was a major focus for ADIA.

In January 2025, ADIA announced that it had chosen Innocap to provide a dedicated managed account platform and as part of this strategic partnership ADIA would gradually take a stake hitting 10%. Mohammed Sghayer Khalaf Al Qubaisi, Deputy Director of the Alternative Investments Department at ADIA, said: “Innocap’s platform provides ADIA with a more cash efficient structure while allowing for greater investment flexibility for some of its hedge fund and equity exposures. Innocap has developed an industry-leading platform which offers a compelling service to asset owners who are seeking more transparency and capital efficiency.”

INNOCAP_press-release_2025-01-14.pdf

Bloomberg reported late last year that ADIA was expanding its uses of managed accounts further and had hit $40 billion of AUM invested in hedge funds. One of ADIA’s largest allocations of recent years was $1 billion to Jain Global and it is likely that ADIA is even more allocated to Millennium and is recycling the money returned by Jain Global back into Millennium. Even Norges Bank, has started to use managed accounts to allocate to equity long/short managers externally.

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The holy grail of hedge fund investing is of course to find uncorrelated returns. The high beta and lack of downside protection given by the industry during the GFC caused flows to stutter, and a new type of hedge fund came to dominate the industry, the multi-strategy hedge fund, and specifically the multi-manager platforms. Market-neutral, obsessed with factor exposure and correlation. The poster child for this, Millennium, a firm with only $8 billion of AUM at the end of 2009 is about to cross the $100 billions of AUM mark soon. Citadel pivoted its business model after its massive 2008 drawdown.

For almost a decade, the hedge fund industry was out in the wilderness at least relative to private markets. Things started to gain further traction last year when the industry saw strong net inflows underpinned by a good year of returns across most strategies.

Hedge fund investment returns for the first half of this year have been even better. Everyone is bullish on hedge funds and bearish on private credit. Hedge funds are suddenly seen as the safe bet – liquid, transparent, and well diversified.

If anyone was doubting the power and leverage of the industry, US bank earnings season this week was a stark reminder. Financing revenues at banks from hedge funds continues to skyrocket. Goldman Sachs just reported a 91% increase year on year for Q2 in equity financing revenues. Hedge fund AUM is growing; leverage is rising, and Asia has been particularly ballistic.

But the age-old question around repeatability hasn’t gone away:

• Has new alpha been found across the board or were trading conditions just cyclically better?

• What is the breadth of the incremental alpha generation, and what are the risks?

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2026 - the year of equities and quant investing

Equity hedge funds had led the way in 2025, and it was more of the same in the first half of this year. This included the standout performance of Tiger Cubs that are geared plays on the AI trade or of broad equity long/short hedge funds like Marshall Wace’s Eureka discretionary fund that was up around 20% in the first half.

Although pulling back in recent days, gross leverage across the equity hedge fund segment was high in the second quarter. It has also risen significantly in recent years as illustrated by the below chart from the US Treasury's Office of Financial Research.

The sugar highs that we have seen for industry AUM, net inflows and overall investment performance mask a more mixed performance when looking at strategies beyond discretionary equity long/short.

Despite the media periodically talking about “quant quakes”, the quant funds across the spectrum have done well when we look at the first half in aggregate. Of course, July has been tougher for both strategies.

The chart below illustrates investment returns across some large quant players for the first half of 2026. D.E. Shaw’s macro fund Oculus continues to produce incredible returns. Asian fund Quantedge also led the pack albeit it has net long bias and heavy correlation to equity markets. Its low Sharpe ratio contrasts massively with the high Sharpe ratios of top US quant firms.

In addition to the above, Two Sigma had shown decent returns through the early months of the year. The flagship vehicle for the fast-growing Capital Fund Management (CFM), a Paris-based hedge fund managing $29 billion, has been a laggard with low single digit returns this year but it's other funds that are in aggregate just as large have seen high single digit and low double-digit returns. These include ones with more focus on trend-following and systematic macro.

A tough market for discretionary FICC

Although not as obvious from the bull market headlines, it has been a more mixed year for discretionary macro, fixed income relative value, credit and commodities.

Discretionary macro managers that massively outperformed systematic rivals last year have underperformed significantly as a group with things particularly tough for fixed income relative value funds that haven’t really recovered from the March bloodbath. This contrasts with the bullish sentiment from allocators towards discretionary macro over the last year.

The chart below illustrates investment performance for some of the largest dedicated players in the space. But these funds will of course include equities and equity-linked sleeves as well. Beyond the perennial outperformance of Rokos (numbers below are from the end of May), the Wizard of Oz Greg Coffey’s Kirkoswald has continued its recent hot run with Caxton and Taula laggards. The data below is sourced from Bloomberg.

Are all multi-managers the same?

The monthly returns from the big multi-managers naturally garner a lot of attention. A few days ago, I again wrote about the business model differences between Millennium and Citadel. But at a time of such disparity in performance between equities, quant and discretionary FICC strategies, it is worth remembering the different asset class mixes of each multi-manager platform.

The segment has recovered well from the March drawdowns, but this has been heavily dependent on discretionary equities and quant investing teams. I noted recently how Citadel’s discretionary equities fund was up 11% in the first half of the year, and a combination of this and its systematic strategies (GQS) was up 14% (likely together around half of Citadel’s investing). By contrast, Citadel’s fixed income strategies were broadly flat.

Citadel’s commodities business doesn’t have a separate fund, but the flagship Wellington composite fund being up only 5.7% over this period suggests that commodities returns were weak. Moreover, Ken Griffin recently told a Goldman Sachs podcast that the firm had been surprised by the supply and demand dynamics in the oil market this year, particularly the elasticity of Chinese demand.

The Citadel example is bit stark and suggests company specific performance in its fixed income business, but the same mix can be seen at Schonfeld, where its discretionary equities fund was up 12.3%, but its overall master fund lagged with 8.4% returns.

The strong outperformance of both Point72 and to a lesser extent Schonfeld would have been impacted by their strategy mix. Despite the massive investments in recent years in macro, Point72 remains predominantly an equity focused multi-manager. The firm now manages around $55 billion of AUM, putting it closer to Citadel than the latter is to Millennium at least in terms of client money managed. I wrote about Point 72’s amazing comeback story earlier this year. Balyasny also has an equity bias but in addition to expanding into macro investing like Point72, it has expanded aggressively in commodities and struggled a little there. That said, in no way is the business mix difference large enough to provide a plausible explanation for Point72 being up 14.5% in the first half of 2026 and Balyasny being up only 2.6%.

A few weeks ago, I profiled Asian multi-manager platforms like Dymon Asia and Polymer Asia. These funds have a wide range of strategies but at the end of the day, have a very heavy Asian equities bias.

Schonfeld goes back to its roots

Schonfeld’s roots lie in systematic trading, which it first moved into more than 25 years ago. Since transitioning from family office to taking in external money a decade ago, it has generated low teens returns per year.

AUM more than doubled between 2000 and 2022, and headcount also more than doubled. Schonfeld went on an expansion phase, including getting bigger in macro trading. But weak returns in 2022 and 2023 led to outflows. After the tie-up talks with Millennium ended in 2023, Schonfeld was restructured and reduced headcount by 15%. It also doubled down on its areas of expertise: quant trading and to a lesser extent discretionary equity long/short.

Investment returns started to improve again in 2024, and AUM has now ballooned to more than $22 billion. With less macro and fixed income relative value exposure and no commodities business, Schonfeld has been in the right asset classes and investing styles for the last 18 months.

Unlike the last cycle, the firm has been more disciplined, and headcount has only grown by 15% from the trough. Schonfeld’s AUM per employee, which had been in the $13-16 million range between 2020 and 2025, is now $20 million. This puts it a par with Citadel and ExodusPoint on this metric and well above most of the multi-manager platforms.

The chart below illustrates this journey.

Read on for more on Walleye Capital, ExodusPoint and then the credit space.

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Early last year I wrote about how Citadel and Millennium are always bucketed together but there are large business model differences:

- the level of collaboration across investment teams at Citadel is much greater than the siloed de-centralized pod structure of Millennium,

- there are hard fixed drawdown limits at Millennium versus no hard limits/stop losses at Citadel,

- much higher historical returns at Citadel but lower volatility at Millennium,

- larger trading books at Citadel drive much higher AUM per employee

- huge external manager allocations that Millennium makes,

- the unique power of Citadel’s incredible commodities business.

Today, all those things remain true but one noticeable trend is how Millennium is being more aggressive on expansion than Citadel. Both firms remain elite and selective. They are hiring and firing. They are returning money to investors periodically.

But Millennium is allocating money at an intensity not seen before in the industry. A senior executive at one of their competitors said to me the other day that $1 billion ticket sizes are the new $100 million tickets when it comes to Millennium’s allocations to external hedge funds. QRT may be catching up in terms of numbers of allocations, but the sure size of Millennium’s external commitments is unprecedented.

A sizeable gap has opened in recent years in AUM between Millennium and Citadel. But is this gap temporary or is it likely to get wider?

The current gap

Millennium Management has grown its headcount over the last 3 years by more than 40% to more than 6,800 people. It has over 140 employee locations. It is now of the scale of a mini-investment bank.

The hedge fund Citadel has grown headcount by more than 15% over the same period to 3,300 employees. It has a much smaller number of locations with Ken Griffin evangelical about the benefits of working from the office and the collaboration this drives. At the end of last year when Citadel announced plans to open a Dubai office it was one of the last major hedge funds to open a local office in the region, illustrating Citadel’s preference for a smaller number of offices.

The trend in AUM growth has been even more stark. Over the last 3 and a half years, Millennium’s AUM has grown by around 50% while Citadel’s has grown by high single digit percentages in total. The numbers in the chart below are for the year end.

Citadel’s AUM of around $70 billion is now more than $20 billion lower than Millennium.

Point in time comparisons are always open to not telling the exact picture so the above chart is meant to make the point directionally rather than scientifically.

Firstly, Citadel had two monster years of 27% and 38% returns in 2021 and 2022 outperforming Millennium and almost everyone else. It also did slightly better in 2023. This had meant that its AUM had grown faster than Millennium in the lead up to this snapshot. 2024 and 2025 returns were similar between the two firms. But in 2026 Millennium is up 10% while Citadel is up around 5%.

Secondly Citadel has returned over $30 billion to its investors since 2017 including $7 billion at the start of 2024 and $5 billion in early 2026. By contrast, Millennium has not had these sizeable annual distributions during this period. It had rotated around $30 billion of funds into new longer duration share classes in 2021 and 2022. In fact, Millennium raised $10 billion of fresh funds in late 2024 in a private equity style drawdown structure - pledged amounts to be deployed over several years.

The gap versus the peer group

This trend is not specific to just Millennium. Point72 reported AUM of $50.7 billion at the end of Q1 2026 and had returns of around 10% in the Q2 2026, which would imply an end of H1 2026 AUM of more than $55 billion. So, the AUM gap between Millennium and Citadel is now bigger than between Citadel and Point72. This is particularly notable as at the end of 2023 Citadel’s AUM was twice as large as Point72. I wrote about the Point72 comeback at the start of this year in…

On the quant side, the giants are also growing fast. D.E. Shaw has seen incredible returns this year. According to Bloomberg, D.E. Shaw’s flagship composite fund was up 14% (3.2% in June) and its macro Oculus fund up 27.5% (5.6% in June) in the first half of 2026. The company’s website says “as of June 1, 2026, the D. E. Shaw group had more than $100 billion in investment and committed capital.

For more on D.E. Shaw read…https://rupakghose.substack.com/p/de-shaw-the-quant-king

Business Insider reported last week that QRT’s AUM had hit $50 billion a multiple of the $14 billion the firm managed in 2023.

For more on QRT read…https://rupakghose.substack.com/p/the-rise-of-qrt

The future gap

Looking forward this gap will only grow.

A larger percentage of the AUM of Citadel comes from Ken Griffin and other insiders than the percentage of AUM at Millennium that comes from Israel Englander and his team. Citadel has higher return expectations than Millennium. Moreover, this year and in 2025 Citadel uncharacteristically lagged the peer group. Its giant world-leading energy trading franchise faced tougher market conditions. But what has been a little concerning is how its fixed income business has lagged top fixed income players. Millennium also lagged peers last year but has shown solid returns this year with Bloomberg citing the success of its large index rebalancing team.

The bigger question is really about the vision of the founders. Griffin is very much focused on generating alpha within a cohesive organization with very rare examples of external allocations. At the same time his other business Citadel Securities (separately run) is in the middle of a scaling period.

Meanwhile last year Millennium sold a 15% stake at a valuation of $14 billion. I wrote at the time that: https://rupakghose.substack.com/p/is-millennium-worth-14bn

“The Millennium stake sale is likely more about succession planning and creating a sensible valuation from which to price share options for his senior management than Englander calling the top. Institutional Investor Magazine estimated that Englander made $4bn last year and he is worth more than $15bn so the proceeds of the stake sale are not material in that context.”

A few weeks ago, Bloomberg reported that Millennium is planning on raising another drawdown fund of $10 billion. This should help push the firm over the $100 billion mark. It is also unsurprising given the upcoming external commitments that Millennium has made. Jain Global has struggled to scale with the costly drag of running a full-fledged pod shop. Although running money exclusively for Millennium should allow it to reduce costs substantially it will require a very large allocation from Millennium above the $4-5 billion currently in the main Jain Global fund. Of course, the hugely diversified Millennium can add a little leverage to this allocation, but it is still a substantial amount of client funds/equity capital that will required to back it.

I wrote in https://rupakghose.substack.com/p/jain-and-the-house-of-millennium about how the desire for collaboration or not in-house spills over into whether external allocations make sense for the two firms:

“The theme of external allocations also highlights fundamental business model differences between Millennium and Citadel that are often understated. I compared the two firms in an earlier piece. Both are hyper competitive and performance focused but there is a widening gulf in terms of levels of internal integration. Citadel very rarely even considers external allocations.”

Millennium has also made several other high-profile commitments to external managers recently. This includes more than $1 billion to former Citadel quant researcher Paul Dou’s Hong Kong-based Third Epilson and a future allocation to the new hedge fund of one of Jump Trading’s most senior quant researchers Yiming Zhang.

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But every so often a Cathie Wood turns up that is a money-making machine. Us dour Brits don’t have any such glitz, but we did have the “English Warren Buffett” that is Terry Smith. Full disclosure I knew Terry from when he was a business CEO, and we were big rivals in the interdealer broker space. Terry is very smart and analytical, albeit was never big on innovation in his CEO days.

The rise and fall of Fundsmith is daily cannon fodder for social media now but what I wondered is maybe active long only equities – particularly in a bull market – is not a bad business for the principals if you get the timing right!

Fundsmith charges premium fees for a long only asset manager. It has generated management fees of £2-3 billion over 15 years. With limited costs and high cash generation, that is a lot of money for Terry Smith and his key team members.

Meanwhile, how did investors in the Fundsmith fund do?

At the end of December 2021, Fundsmith Equity Fund had an AUM of £28.9 billion. Its annualized returns since inception (2011) were 18.6%. This was well ahead of the MSCI World GBP returns of 12.9% per year.

But by the end of June 2026, Fundsmith Equity Fund had an AUM of £12.3 billion. Its annualized returns since inception were 13.1% only slightly ahead of the MSCI World GBP returns of 12.5% per year.

Weighted for AUM levels, the average investor in Fundsmith underperformed the index given AUM was small in the first few years when outperformance was greater. A story as old as time is fund managers having a few good years of performance, being marketing geniuses and raising a ton of money from the back of it and lucrative fees.

Fundsmith has finally started to see large outflows and is pivoting as a response largely to this in my view. There is lots of social media chatter about whether this is a major flip-flop or a sign of required flexibility.

But I just wonder if it would have been better to have been a shareholder in the Fundsmith operating company than in the funds themselves?

Of course, Fundsmith doesn’t have a terminal value, but a couple of billion in management fees has been a lucrative ride!

In this piece I look at:

• the just announced strategy pivot towards more momentum,

• Fundsmith recent returns,

• and Fundsmith the business vs investing in Fundsmith funds.

The pivot to momentum

I wrote about the rise and fall of Fundsmith at the start of the year….

But the fund has dramatically underperformed stock markets since then, and the half-year letter from Terry Smith and team reads very much like a surrender document.

It says, “Our investment mantra is to seek to: 1. Buy good companies 2. Don’t overpay 3. Do nothing.”

It follows this with: “However, it seems clear that the third leg of our strategy which probably needs the most change and our portfolio turnover hit a high of 51% in the first half of this year as we made significant changes in the portfolio. However, you should not expect that level of turnover to become the norm.”

The final capitulation follows soon after: “We will take more account of momentum — both fundamental and share price — in our investment decisions. In particular, we will be much less willing to deploy the time-honoured technique of buying quality companies when they hit a glitch.”

Great investors change their minds all the time and must be open to secular changes in market structure.

But here’s the thing.

There is no explanation of why Fundsmith has an “edge” in understanding momentum or companies that don’t fit into the small lane it has carved out for itself.

No explanation of why Fundsmith has made the abrupt change beyond: “Sticking to our current approach may well fall foul of the adage that the market can remain illogical longer than we can remain in business. You should therefore expect that we will be more active in future.”

Many of the loyal army of UK retail investors were preaching to me in response to my early 2026 piece that lack of style drift is a core part of Fundsmith’s differentiation and they didn’t care about the underperformance because Fundsmith did what was on the tin and was consistent in its strategy.

A quick glance at Fundsmith’s major stock holdings over recent years and compare that with Chris Hohn - another investor shaped in the shadow of Buffett – and you can’t help but feel that Fundsmith were just bad stock pickers and often failing to really understand the moat of many of their largest holdings. Hohn has finally given up on Microsoft, but it remained a major drag for Fundsmith in the first half of 2026. As much as any stock, the massive outperformance and recent underperformance of Microsoft align with Fundsmith’s changing fortunes.

Some of Fundsmith’s recent purchases also illustrate the change in investment style. Having said in the past that he didn’t like cyclical semiconductors and industrials he has jumped into TSMC and GE two stocks up 310% and 700% respectively in the last 5 years

Once again, Fundsmith flagged in their first half newsletter that passive investing is so big that it is becoming the tail that wags the dog and that it is not exactly passive, as we found out from the discussion on when and how SpaceX should be included in indexes. Fundsmith are also correct in highlighting that momentum is very high relative to historical levels and very much overdue a correction.

But there is no discussion of the other factors in the market, such as the increased democratization of investing and participation of retail investors that is likely here to stay or the growth of hedge funds and multi-manager pod shops.

The numbers

As I highlighted before, the relative outperformance of Fundsmith against the index since inception has now been largely eroded. The gap between it and the MSCI World index in GBP terms has been consistently large now for 4 and a half years.

The chart below shows the UK AUM for Fundsmith’s flagship Equity fund over the last few years and how small it was in the first 5 years when it had much of its outperformance. Anyone who allocated to Fundsmith after that would have underperformed the MSCI World Index. Moreover, the chart also illustrates how Fundsmith Equity AUM has fallen by 58% from its 2021 peak and how that pace has accelerated over the past twelve months.

Would Fundsmith be pivoting if there was not a run on the bank?

The rationale about needing to survive to be in the game doesn’t hold up given Fundsmith owns a portfolio of highly liquid global large cap stocks not a portfolio of illiquid credit that can’t be sold quickly or has a mismatch with between their hold to maturity and mark to market value.

Surely, if Fundsmith really believes in what they do, they could introduce a lower fee share class to reward the loyal clients who stick with them or just let small be beautiful as redemptions hit?

Chasing AUM rather than alpha seems to be the game, though.

It is the opposite of what Mike Platt did when he turned BlueCrest into a family office after a period of underperformance to allow more freedom to pursue the investment strategy he really believed in.

The fantastic Fundsmith fee machine

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But is the Asian hedge fund industry just a one-trick pony reliant on rampant rising stock markets, and can it compete with international players in an industry where scale matters much more than ever before?

In this piece I look at:

• the Asian hedge funds benefiting from the equity bull market,

• international multi-manager giants going to Asia,

• the Asian multi-manager platforms like Dymon Asia,

• systematic managers in Mainland China, and

• Quantedge - the new quant powerhouse.

Riding the equity bull market

Many large, Asian equity hedge funds with significant net long bias have delivered eye-watering investment returns in the first half of 2026. Bloomberg reported that $9bn TAL China Focus was up 95%, $6bn Keystone was up 63% and $11bn+ FengHe was up 29%.

The growth of Singapore based FengHe Fund Management was profiled by Bloomberg earlier this year. The fund was started in 2012 and has only had one down year. It has broad exposure to Asia across not just China but the tech supply chain and other areas. It runs a centralized model where a team of 20 analysts make recommendations including filling out long online questionnaires about potential new stock investments. Founder Matt Hu is the only person at the firm who can fully sign off on a new investment.

The fund has benefited from the equity bull market. It’s AUM has jumped from $4bn at the end of 2024 to almost three times that today. Net returns in 2025 were 27%.

But FengHe’s growth is not unique. Greater China stocks-focused Keystone was only launched in 2022 after spinning out of Schonfeld. Underpinned by strong returns, its AUM rose from $2bn to $6bn over the last 2 years. Aspex Management was founded in 2018, hit $9bn of AUM by 2024 and is $14bn today.

The largest hedge fund in Asia is likely to be HHLR Advisors, the public markets side of Asian private markets giant Hillhouse. Exact AUM numbers are difficult to estimate though given HHLR has a mixture of hedge funds and long only funds. As I have discussed before there are many hedge funds in the West that are essentially hedge funds because of the regulatory wrapper rather than any attempt to being anything but a long only portfolio.

Asia’s much greater diversity relative to other regions can also be seen with some funds specializing in specific countries. Japan’s economic and capital markets renaissance has also led to significant growth of interest in the region. Decades old Japan specialists such as Ichigo Asset Management and Effissimo capital management have relatively sizeable AUMs of $7-8bn today.

International multi-manager giants go to Asia

The big US multi-manager platforms have been expanding aggressively in Asia. Balyasny COO Kevin Byrne told Bloomberg earlier this year that its Asia revenues rose 82% in 2025, and that the combined headcount across the firm’s Hong Kong, Singapore and Tokyo offices increased by 40% over the prior two years to about 250. Of this around 130 were investment staff. And they, like all their peers, define Asia as APAC with the fast-growing UAE offices, of course part of an EMEA regional grouping.

Although APAC remains on average only around 10% of the largest multi-manager platform’s global headcount, in absolute terms these numbers still make them amongst the largest hedge funds in Asia. It is twenty years since Citadel and Point72 (under the SAC Capital brand) opened their Hong Kong offices, which remains for most US firms their largest in Asia.

As well as competing with local players for talent, these US multi-manager platforms are competing in Asia with other multi-strategy firms such as Brevan Howard in the fixed income relative value and macro space. Brevan’s Asia presence is led by Minal Bathwal’s MB Macro Fund, which combines fixed income relative value with directional macro bets. Bloomberg recently did a profile on Bathwal who manages around $6 billion and has averaged an annualized return of 12.7% between 2008 and 2025 with a Sharpe ratio of 1.7. In this period, he has not had a single loss-making year. His returns have been a little weaker over the last decade.

Some big international multi-strategy firms also have strategic relationships in Asia. For instance, Capula sold a 15% stake to Japanese insurer Dai-ichi Life.

The diversity of Asia with its local stories and capital markets ecosystems specific to an individual country makes it more challenging for hedge fund business development teams that need to source talent on the ground.

In line with their strategy in other markets, US giants, particularly Millennium, are also backing local players with capital. For instance, in 2024 it gave $1.5 billion to the new multi-strategy macro focused fund Aeonea, run by a former Balyasny portfolio manager (PM) who had been a Goldman Sachs macro trader. In this case, it was to manage money exclusively for Millennium.

In 2025 former Goldman Sachs commodities trading co-head Qin Xiao launched Singapore-based Nexus commodities with $1 billion from Millennium but on a non-exclusive basis. Pan-Asia equity long/short manager Optimus Capital, a fund that had been around for 10 years but with only a few hundred million dollars of AUM also received a billion-dollar allocation from Millennium last year.

Next up for Millennium in Asia is backing former Citadel quant researcher Paul Dou’s Hong Kong-based Third Epilson with an allocation that could exceed $1 billion.

This is a path which has been fruitful for Millennium already in Asia as it has been in other geographies. The biggest of these successes was Symmetry Investments launched in 2014 with $1bn from Millennium and $0.2bn from external investors. The firm’s co-founders Feng Guo and Michael Robinson worked at Millennium. Guo remains CIO of Symmetry today and its $13 billion in client AUM is highly leveraged given its focus on macro and fixed income relative value trading not just in Asia but also in areas like the US Treasury basis trade. The firm has established a strong reputation as a Tier 1 player in their niche.

That said, as we saw with Modular Asset Management (ex- Millennium PM who had been managing $600 million for Millennium), these deals can come to an end when either or both parties outgrow each other.

But Millennium is not the only global multi-manager giant that has made successful allocations. Schonfeld had invested more than $1 billion with Hong Kong-based equity stat arb specialist Y-Intercept, which had been running money exclusively for it until recently.

The Asian multi-manager platforms

The Asian multi-strategy space was shaken when a major scandal led to the implosion of Segantii, a relative value equities and event-driven fund in 2024. The firm had been founded in 2007, was known as the “block trade king” of Asia. At its peak Segantii’s AUM hit $6.2 billion in 2021.

But homegrown Asian multi-manager platforms are emerging and achieving a decent scale. As well as hiring from Asian single managers, they are competing with the big US multi-manager platforms in the talent war. The geographical diversity I mentioned earlier in the last section also creates an opportunity for these Asian multi-manager platforms with their local market knowledge and connections.

In the first half of 2026, Dymon Asia and Polymer Capital Asia - which have AUM of $9 billion and $6 billion respectively - generated net returns well ahead of the top US multi-manager platforms. The chart below shows performance statistics sourced from Bloomberg.

Dymon Asia launched a macro hedge fund run by founder Danny Yong in 2008 with high teens net returns over the first few years. By the time President Jay Luo joined from SAC Capital in 2012, Dymon Asia was managing $2.5 billion in its macro fund. In 2014, Temasek helped fund the firm’s fundamental equities buildout.

Today macro and equity long/short remain Dymon Asia’s biggest asset class/investing styles. But following three negative years from 2017 to 2019, Yong stepped back from managing the macro funds to a coach role and in 2020 the firm transitioned from single manager to a multi-manager platform investing across a wide varies of styles including fixed income relative value. Asia accounts for 90% of Dymon Asia’s fund exposure and three-quarters of its clients.

Dymon Asia has grown considerably in the last 5-6 years. It has more than 75 PMs in Singapore, Hong Kong, Shanghai, Mumbai and most recently Japan, London and Dubai. A new office is opening in Seoul, Korea soon. Like its larger US competitors, it deploys a pass-through fee model, tries to ensure low correlations between pods and has a steady turnover of around 20% of PMs in any given year.

Dymon Asia founder Danny Yong is integral to monitoring and nurturing the investment side, but its President Jay Luo was the head of SAC Capital in APAC from 2006 to 2012 so has a long background in the space. He believes that the minimum size for a pod shop is to have 40 PMs.

Dymon Asia’s AUM has doubled in the last 2 years, and its headcount rose 50% in the last year or so to more than 350. This growth has been underpinned by strong net returns. The chart below shows Dymon Asia’s net returns versus the median net returns of 6 leading multi-manager platforms (Millennium, Citadel, Point72, Balyasny, Schonfeld, ExodusPoint).

Since 2023, Dymon Asia has outperformed. The average for the 6 competitors in 2022 was also skewed by Citadel’s monster 38% which was driven by its energy trading business. Excluding that the median net return was around 9% for the peers in 2022.

Dymon Asia’s growth has also been underpinned by a shift to a new fee structure in early 2024, with a hurdle rate of 5% and then a scale where the greater the performance, the higher the performance fee percentage. The table below illustrates this innovative structure. The only one of the big US multi-manager platforms to adopt a hurdle rate before charging performance fees is ExodusPoint.

The second largest Asian multi-manager platform Polymer Capital Management was set up in 2019 by Angus Wai and Asian alternatives firm PAG. Wai spent a decade at SAC Capital/Point72, including succeeding Dymon Asia’s Jay Luo as head of APAC for the firm. The flagship fund is market-neutral but focused on equities, without the asset class diversification of US multi-manager platforms. Since 2024 Polymer has expanded into single country funds focused on China A-shares and Japan.

More recently, in 2024 the former Millennium Asia Co-Chief Executive Officer Jonathan Xiong launched a Singapore based multi-strategy hedge fund with $0.5 billion. Backers included Canada Pension Plan, Blackstone and a unit of Temasek. Arrowpoint’s AUM and headcount have grown to almost $2 billion and 140 employees respectively. Its returns have been less explosive than Dymon or Polymer Asia this year, but the firm is increasingly well diversified across multiple asset classes and investing styles.

Read on for the sections on systematic hedge funds in Asia…

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I wrote about Bill Ackman last week and a while back he gave some advice on chat up lines in dating: “May I meet you?”

What would a sell side research analyst say to their buy side clients in voting not mating season: “May I fill out your Extel voting form”?

Equity markets are booming, and so are the sell side equities businesses of banks. Demand for financing is so high that the top prime brokers continue to have to turn away smaller hedge fund launches.

But one group of sell siders that has suffered decades of unrequited love seems to be asking for affection more than ever. Even by the standards of LinkedIn the home of corny and often fictional self-promotion, the barrage of sell side analysts filling my feed earlier this year with “Please vote for me in the coming Extel rankings if I have added value to you” is cringe-worthy.

Analysts are resorting to a variety of tactics from sharing family photos and personal stories before the follow up post asking for votes. All this with the subt…

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It’s been two years since I last wrote about the Kim Kardashian of the hedge fund industry. He had just sold 10% of Pershing Square the management company for over $1bn implying a staggering $10 billion plus valuation for a hedge fund with AUM of a mere $16 billion.

I noted that the challenge of hedge funds IPOs is that they typically don’t go well because higher multiple management fees are crucial to the valuation, and this involves being asset gathering machines. The private markets giants had been better (to date) at this, particularly given their diversification beyond private equity. (They are now facing the age-old question of whether they expanded too fast.)

I worked on many hedge fund IPOs when I was on the sell side covering the sector during its early years of institutionalizing pre and post GFC. One I hadn’t worked on but that achieved a lofty valuation in 2007 was Och-Ziff, one of the original low volatility consistent return multi-strategy hedge funds. Och-Ziff’s valuation of $12 billion at IPO was a lofty 40% of AUM albeit because of performance fees the earnings multiple was a less lofty 13x. Och-Ziff was also an industry leader at the time and had grown AUM from $7bn to $30bn in the 5 years before its IPO. After a decade of decline, the firm was eventually sold to Rithm Capital in 2023 for $720m.

Why on earth would investors value Pershing Square at more than $10 billion though?

It was a rather odd list of investors and allocators buying in the 2024 stake sale but still difficult to comprehend.

Investing is of course about the future more than the present, and in mid 2024 Ackman had just announced plans for a new permanent capital fund listed in the US. He hoped to raise $25 billion and generate hedge fund like management fees on this.

As chief tweeter for the hedge fund industry, Ackman has 2.5m followers and is famous for his long essays on X.

The thought was that he could tweet his way to attract a tsunami of retail money so not only must he be highly confident of the $25 billion to announce it, but there must also be plans for other fund raisings to turn his business into an asset gathering machine. Alas, a few months later, Ackman scaled back the $25 billion to $2 billion and then cancelled the plans.

This year Bill Ackman got back on the horse and finally did the IPO for a NYSE-listed permanent capital fund. He targeted a more realistic offering size of between $5 billion and $10 billion having already secured anchor commitments from family offices, pension funds, insurance companies and UHNW investors of $2.8 billion. These anchor investors are restricted from selling shares for 6 months.

In the end, the permanent capital fund raised another $2.2 billion to give a total of a more modest but decent $5 billion. To incentivize investors, Ackman had to throw in 20 shares in the Pershing Square management company for every 100 shares in the permanent capital fund.

The Pershing Square management company was IPOed under the ticker symbol PS and started trading at $24 per share. It rallied hard after Ackman started buying shares in the aftermarket but has settled back down at a share price of $29.6. The implied market capitalization of $11.8 billion is still lofty compared to the current fee-paying AUM of around $23 billion.

The valuation of the latter bakes in a lot of hope and aspiration for future fund-raising, leveraging the Ackman brand and social media footprint with Kardashian family like efficient monetization.

Meanwhile, the long-suffering shareholders of Pershing Square’s primary source of capital, the UK listed closed end fund Pershing Square Holdings (PSH) has seen its share price crater and the discount to NAV increase further. PSH manages around $13-14 billion of client AUM with another $4 billion of leverage on top.

Pershing Square returns

PSH has seen its NAV decline by almost 10% this month, giving a year-to-date return of –13%. The share price of PSH has fallen by 21% this year as the discount to NAV has widened even further. This contrasts with the 7% increase in the S&P 500 this year.

The $5 billion PSUS (Pershing Square US) permanent capital fund listed on the NYSE on April 29th, 2026, at $50 per share. Today the share price of the fund is $37 per share. This 25% decline mirrors the issues at the flagship PSH with investments underperforming the stock market and the discount to NAV rising.

Both funds have largely a very similar concentrated portfolio of 12 North American stocks. Ackman’s focus on big tech names like Microsoft, Amazon, Meta and Uber and no semiconductor names has been painful. Similarly, previously profitable investments in the GSEs such as Freddie Mac and Fannie Mae have sold off aggressively this year. The largest single investment in the private markets giant Brookfield has also been loss-making. Many of these names were positive contributors to PSH last year. June was particularly brutal for stocks like Microsoft.

PSH’s stats in the table below from the end of May show that even before the NAV discount problem, its underlying performance has been mixed. PSH’s NAV returns have lagged the S&P500 over most periods.

Although PSH has underperformed the US stock market since it was launched in 2012, Ackman likes to cherry-pick the 8- or 10-year horizon which includes his 70% return for 2020 owing to Ackman’s highly successful credit trade that cost $26 million but generated a $2.6 billion return. He also likes to highlight that Pershing Square’s returns since the inception of the firm in 2004 has been outstanding at 15.9% per year versus 10.7% per year for the S&P500.

But here’s the thing. Like many star managers, fund returns were incredible in the early years on small amounts of AUM, so the dollar weighted equivalent would look materially lower than 15.9%. Earlier this year I wrote about how a similar large difference between simple time weighted and dollar weighted equivalent could be seen with the UK’s star manager Terry Smith who had outperformed when smaller in size.

Unlike jumbo hedge funds launches of the pre GFC era, Ackman started small with just over $50 million of seed capital in 2004 and averaged 31% net returns in his first 4 years (2004-2007) and 25% net returns in his first 8 years (2004-20011). This is particularly relevant as Pershing Square is trying to expand its capital base fast.

The bull market for US stocks is also relevant because with odd exceptions such as the 2020 credit hedge, Pershing Square is a long only fund. In fact, it is leveraged long so potentially even higher beta than long only funds. It doesn’t use futures margin but typically relies on long-term debt maturities to build a 125% gross exposure into its funds like PSH.

Read on to understand how Pershing Square makes money, its valuation, the growth outlook and what exactly the firm is and its competitive advantage....

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In this piece I look at what could be another really big quarter for the nonbank proprietary trading firms that are much more exposed to the retail trading ecosystem than hedge funds. I look at:

• the monster Q1 revenues for nonbank trading firms,

• the retail boom in US stocks and options,

• which firms benefit from the US retail boom,

• the trading firms that dominate in ETFs,

• banks getting back into retail trading, and

• nonbank proprietary trading firms taking on hedge funds.

Monster Q1 2026 revenues

The big US investment banks are forecasting double-digit year-on-year revenue growth for their trading franchises in the second quarter. But just like the first quarter of the year, it is likely this growth will be overshadowed by the massive growth in trading revenues for nonbank firms.

It is worth re-capping what we saw in Q1 2026.

The standout performers were the more hedge fund-like Jane Street and Hudson River Trading (HRT), which generated revenues of $16.4 billion and $6.4 billion, up 122% and 135% year-on-year respectively. A small part of the growth of the former was of course its VC type equity stakes in several high-profile AI companies like Anthropic.

More market maker like Citadel Securities and Virtu generated revenues of $4.3 billion and $0.8 billion, up 27% and 58% respectively.

And a similar trend could be seen when looking at Q1 2026 vs Q1 2024. Jane Street and HRT were up 264% and 288% on Q1 2024 while Citadel Securities and Virtu were up 87% and 114% year-on-year.

The contrast with the big investment banks was even more stark with Goldman Sachs’ equity intermediation (i.e. trading) revenues up 7% year-on-year in Q1 2026 and up 36% versus 2024 levels. Overall markets division revenues were up more across Wall Street banks than that of their trading desks driven by financing.

The retail boom in US stocks and options

Individual investors’ share of US stock trading volumes was just over 10% in 2011 and reached 20-25% in recent years. But unlike the 2021 meme stock era of Roaring Kitty, this year there has been a firm concentration of these retail investors in big tech, AI and semiconductor names.

The always thoughtful Scott Rubner now powered by Citadel Securities data had his latest update on market flows out this week and it had some unsurprising but nonetheless very interesting statistics.

Citadel Securities would naturally be bullish about the outlook for US retail investor participation given they are on the other side of so much of this flow but here are the actual stats from Rubner:

“May shattered previous activity records in cash equities, surpassing the prior monthly high set in January 2021 by more than 10%. Retail cash equity volumes ran 60% above the 2025 average and more than twice the 2024 average. From this peak, activity has accelerated further in June, with volumes this month tracking 9% above May’s record. Nine of the ten largest retail trading days ever observed on our platform have occurred in just the last month, including seven during the first half of June alone. Friday (June 12) marked the largest single day of retail net buying in our dataset, surpassing the previous record by 50%.”

More of the same in equity options...

“Options activity is similarly breaking records. Average daily options volume on the Citadel Securities retail platform reached a record high in May, running 20% above the trailing one-year average. Participation has continued to build in June, with volumes surpassing the highs made last month by another 20%.”

Rubner went on to discuss how the retail investor had evolved from chasing speculative meme stocks to being concentrated on the same stocks that institutions are chasing. This comes at a time when correlation between highly leveraged multi-strategy hedge fund equities teams and stock market moves are at an all-time high.

So, everyone is leveraged long the same trade, and the music is playing so keep dancing. Data from Citadel Securities also shows that the average daily options premium traded in semiconductor companies has gone up in a straight line over recent months with May five times the historical average and June running up 16% on May’s record.

Retail investors continue to have a “buy-the-dip” mentality on most down days, and Citadel Securities shows that this trend has become materially stronger this year.

Which firms benefit from the US retail boom?

Payment for order flow data gives us significant granularity on the players in US retail markets.

In stock trading, the gap between Citadel Securities and second place Virtu has increased significantly in the last two years. HRT and Jane Street are not too far behind Virtu and well ahead of the rest. Jane Street entered the retail wholesale market in 2019, but the rise of HRT has been even steeper having only entered the niche in 2022.

In the listed equity options space Citadel Securities remains the market leader. The number 2 player in US retail equity options is a less well-known player - at least outside of trading circles - and this is Dutch market maker IMC. It is a firm I wrote about recently. IMC only reports financial results on an annual basis, so we will not see the revenue impact publicly for a while.

One of the earliest products that Jane Street started trading at the same time as ETFs was US-listed options. But the firm only entered the retail wholesaler channel in 2024. Since then, it has quickly garnered significant market share and is now well ahead of the mighty Susquehanna and Wolverine for the number 3 place in terms of trading volumes.

Susquehanna has continued to lose to new competitors in the retail wholesale channel. 5 years ago, its payment for order flow in the segment was nearly two-thirds of Citadel Securities, and today it is less than one-third of it.

In summary, Citadel Securities is the largest beneficiary of the recent surge in US retail activity. It executes around 35% of all US-listed retail volumes, making it easily the number 1 US retail market maker. I would expect their year-on-year revenue growth to pick up materially in the second quarter and close the gap on peers that are less focused on the US retail market.

But the likes of Virtu, IMC, HRT and Jane Street are also likely to see strong Q2 results. The two latter firms were the big winners in recent quarters. They have a strong retail footprint and with the hedge fund trading environment much improved this quarter, their proprietary trading bets are likely to have continued to generate huge profits.

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“Talent is global, but opportunity is not” Igor Tulchinsky

Igor Tulchinsky’s colourful dress-sense (well actually he just wears black mostly!) makes him stand out among finance types but he has been making the news in my part of the world with a generous donation…Why I am funding the Bayeux Tapestry’s show at the British Museum

I have been writing a lot about the growth of quant fund giants - D.E. Shaw, RenTec, QRT, CFM, Two Sigma and Squarepoint - that are increasingly of the scale of the large multimanager platforms. I have also written extensively on proprietary trading firms like HRT that overlap increasingly with quant hedge funds in the mid-frequency space.

The amount of data and compute required as well as the level of competition and crowding has increased the barriers to entry in the space. Consequently, we have seen very few new firms successfully launching in the last few years.

But one long established firm has rarely got a mention in this Substack so far. Not because I haven’t noticed their growth but because I haven’t been able to get any investment performance numbers. It always felt like writing a restaurant review - based on the location, decor, ambiance, chef and waiter service - all without tasting the food or knowing if it was any good!

I still haven’t come across any investment performance numbers for WorldQuant but as we are all taken over by World Cup fever, I couldn’t think of a hedge fund that better embodies the tournament’s international spirit. You could probably argue that Millennium is more global, but they are not as deep in emerging markets as WorldQuant.

In this piece I look at how WorldQuant:

• Has partnered with the mother ship Millennium,

• Rode the trend of net long hedge fund-lite strategies,

• Thinks Global and Acts Local,

• Has a top team around Tulchinsky,

• Focuses on quantity as quality,

• Shows scale and efficiency.

Partnering with Millennium

The genesis of WorldQuant is the 12 years that Igor Tulchinsky spent running an equity statistical arbitrage pod for Millennium between 1995 and 2007. WorldQuant was born as an independent firm in 2007 but running money exclusively for Millennium and leveraging Millennium’s infrastructure including risk, compliance, and execution.

It was a challenging start for WorldQuant to face the 2007 quant quake. WorldQuant avoided major losses because in the days ahead of the turmoil, Tulchinsky gradually pulled capital despite daily losses. By the time the sharpest part of the sell off occurred, Tulchinsky had pulled all his capital from the markets. He had learnt the Millennium way of risk management and cutting loss making positions systematically.

In 2015, the Wall Street Journal noted that WorldQuant had been discussing with Millennium the idea of taking in external money. Being the first Millennium pod to ever spin out while continuing to manage Millennium money and then take on external money can’t have been a straightforward negotiation. It took until 2018 for this to become a reality.

Tulchinsky’s pitch to Englander was that there were signals and styles that could be scaled at WorldQuant that did not fit into the traditional Millennium wheelhouse.

The WMA (WorldQuant Millennium Advisors) joint venture between the two firms would not be market neutral or highly leveraged (at least compared to Millennium). It would be net long with long positions of 170 for short positions of 70. It would also hold onto positions for longer with a greater tolerance for volatility, neither of which are traits that Millennium pods have. But it would keep WorldQuant’s focus on equities, and in that way the firm is less diversified than peers that have built large macro and futures footprints.

WMA raised $2.3 billion in 2018. It started steadily hitting $5 billion after 5 years by 2023. Then it doubled in size in the next year to $10b billion. According to Bloomberg News, WMA has doubled again in the following eighteen months to more than $20 billion.

Meanwhile, the higher fee money that WorldQuant manages on behalf of Millennium has broadly grown in line with the size of the latter. It has averaged anywhere between 10% and 15% of Millennium’s AUM.

Riding the trend of net long hedge fund-lite strategies

Bloomberg reported earlier this year on the surging demand for equity extension products that typically keep 100% net long exposure but use leverage so that longs exceed 100% and this difference is countered by shorts. It cited data from Nasdaq eVestment that showed that AUM in equity extensions had more than doubled in the 3 years to September 2025, hitting $152.6 billion.

Bloomberg wrote that “WorldQuant Millennium Advisors, a joint venture between Izzy Englander’s hedge fund and the quant firm, launched two new extensions last year after closing its 170/70 fund to new capital at $7 billion.”

My channel checks show that a WMA 150/50 net long offering has raised a significant amount of money recently and that although WMA’s core customer base is institutional, it is also very popular with large private banks. It is unsurprising therefore that WMA is also looking to launch a regular liquidity UCITS fund like Bridgewater and AQR.

Think Global, Act Local

As I highlighted at the start, one of the core beliefs of WorldQuant is “Talent is global, but opportunity is not.” The firm differentiates itself from most in the industry by the lengths to which it goes to source talent globally. Founder Igor Tulchinsky came to America at the age of 11 from Belarus and his immigrant roots likely influenced this.

WorldQuant has long had boots on the ground globally. Even in 2015 when the firm was running only $4 billion for Millennium and no external money, it had 18 offices across more than a dozen countries. Office count kept gradually growing, peaking at 29 in 2020 when it was managing $5 billion for Millennium and $4 billion for external clients.

In early 2020, like many of its peers, WorldQuant went on a slimming exercise and shrunk headcount by around 17% to around 600. This involved closing 5 smaller offices in smaller countries. By 2023 WorldQuant’s headcount had grown by 50% to 900, but office numbers remained below the previous peak at 23. Today WorldQuant has more than 1,100 employees in 28 offices.

But what is most interesting is the global footprint with only 7 of those offices in the US and half in APAC and the Middle East.

Old Greenwich is HQ and there are 4 other trading offices in the US and 2 technology focused offices. The only other offices with trading, research and technology are Budapest in Hungary and Singapore. A large number of the Asian offices are research centres.

The map below shows all the current offices.

In its early days WorldQuant was heavily focused on hiring PhD’s with 125 or 25% of its headcount of 500 in 2017 having PhD’s. As the firm has grown and added new hiring channels, the percentage of PhD’s has fallen. Today more than 160 out of its 1,100 employees have PhD’s. Over the 1997-2017 period, with 3 Math’s Olympiad Gold medals, WorldQuant was 6^th out of hedge funds and proprietary trading firms behind Citadel (LLC + Securities), Jane Street, Jump Trading, Two Sigma and HRT.

Unlike some of the quant giants that focus on top Ivy League STEM types or Math’s Olympiads, and sponsor Math’s and coding competitions focused on these areas WorldQuant is far deeper in its talent search across emerging markets.

WorldQuant expansions into emerging markets and outside of traditional STEM PhDs is told best by the story of Nitesh Maini. An undergraduate and master's degree from IIT Kanpur in Economics is elite no doubt but hardly aligns with our common assumption of quant research hires being PhDs in Physics or Math's. With only 6 months' work experience at McKinsey, Maini was originally hired as a quant researcher by WorldQuant in India, became a portfolio manager only a few years later and has been Tulchinsky’s strategy chief for many years. Today WorldQuant has 3 offices in India.

Maini leads several key efforts for Tulchinsky’s talent net and is one of the faces of the firm in its continuous online education on quant finance. There are two key initiatives he leads.

Firstly, there is BRAIN, an online platform for signal crowd sourcing. There are 150,000 individuals on the platform that submit alphas. Depending on how useful these are, WorldQuant pays commissions to these external contributors and in some cases offers internships and jobs. Around 60 people have been hired for full-time roles through BRAIN, so the firm believes it has proved to be useful for talent identification and marketing. The jury is still out though on how much value it provides relative to more focused programmes at some of WorldQuant’s competitors.

Secondly, there is WorldQuant’s international quant competition. Although many other quant funds sponsor or organize quant or coding competitions what is fascinating about WorldQuant is how global their one is with 3 stages at the universities, national and then international level with the final typically in Singapore. The competition attracts 37,000 participants across 5,000 universities and 180 countries.

Run separately as a non-profit organization but feeding into the top of the talent marketing funnel is WorldQuant University, which has offered free online master’s degrees in financial engineering since 2012.

The top team

Although Igor Tulchinsky is less well known than his former boss Israel Englander, WorldQuant is very much the baby of Tulchinsky just as Millennium is that of Englander.

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In this piece I look at:

• the reversal of fortunes between discretionary and more systematic macro and trend-following strategies,

• how the asset class dispersion is greater than the dispersion between discretionary and systematic (macro or trend-followers),

• and who are the macro managers that are winning and who is bulking up in commodities and equities.

2025 and 2026 returns

In 2025, global macro hedge fund investment returns lagged equity long/short managers that had the tailwind of the bull markets in stocks.

Increased macro divergence, path dependence of interest rates, and cross-asset opportunities were a solid backdrop for most macro managers. Goldman Sachs noted that they were seeing increased allocator demand for discretionary macro.

Nevertheless, it was a tale of two cities. According to HFR, discretionary macro hedge funds were up 15-17% while systematic macro hedge funds were flat for the year. The chart below shows 2025 returns for some of the largest discretionary macro hedge funds.

Similarly, managed futures trend-following hedge funds also struggled in the first half of 2025 and were broadly flat for the year. The Soc. Gen. Trend indicator, which creates hypothetical returns across asset classes, found that trend-following should have generated a 2025 investment return of around 7% gross and 4% net of fees. But the Soc. Gen’s CTA Index of 20 actual systematic funds was flat, and the Soc. Gen Trend Index of 10 large pure trend-followers was up 2.4%. This followed very poor returns in the prior two years.

There has been a reversal of fortunes in 2026. Both macro systematic and discretionary hedge funds were up around 5% in January and did well in February. The systematic CTA/trend-following index also had a strong start to the year. According to HFR Index macro 2026 net returns as of the end of May of 7.5% made it the second-best performing strategy of the year. Discretionary macro was hit worse in the March volatility, and its year-to-date returns of under 7% are trailing the nearly 10% returns for systematic directional strategies. The Soc. Gen. CTA Index and the Soc. Gen. Trend Index are both up 10% this year.

All about commodities and equities for trend-followers

The Soc. Gen. Trend Indicator uses 55 futures contracts across a variety of asset classes. It then uses a simple 20-day/120-day moving average crossover to determine position direction. Although a replication and not 100% correlated to actual systematic CTA or trend-follower hedge fund returns, it gives good colour to the drivers behind trend-follower performance.

As of 10^th June 2026, the Soc. Gen’s Trend Indicator is up around 16% on a gross basis and 13.5% net of fees. The chart below shows the former and the performance attribution from each asset class to the total. The key driver for outperformance has been commodities with equities making a smaller than expected positive contribution. By contrast, the struggles across traditional fixed income have continued, and currency trading has been particularly tough this year.

Strength in commodities was wide based. Half of this year’s performance is driven by gold and silver, but other winners include heating oil, RBOB, Crude oil, Coffee, and Cocoa. This contrasts with 2025 when Gold and Silver had made huge gains while energy and agricultural contracts had made losses.

2025 equity index returns for the trend-following indicator were steady and spread across numerous Continental European and Asian indexes. In 2026 equity indexes were again a positive contributor but almost completely dependent on the AI play that is South Korea’s KOSPI Index.

Both 2025 and 2026 have been tough for FI Macro across bonds and currencies. This follows a poor performance for trend-followers here in 2023 and 2024. The replication index suggests that in 2026 trend-followers are likely to have seen losses across the major European pairs, the New Zealand and Canadian dollars.

SG Trend Indicator Daily Report

A similar but less pronounced asset class trend can be seen across macro hedge funds. The HFR Macro Commodity Index was up 4.5% as of the end of May 2026. This is well below that of the Soc. Gen commodities trend indicators at the end of May 2026. The HRX Macro Active Trading Index performed well at 6.7% but again lagging trend-followers. Meanwhile, the HFR Macro: Currency Index was down 2% this year. It is the only one of the macro sub-indexes down albeit it isn’t as weak as the Soc. Gen FX trend indicators.

Multi-strategy giants struggle in FIC

Graham founder Ken Tropin told the FT that its discretionary PMs had made most of their 2025 returns trading the dollar, gold and US Treasuries. The precious metals trade has of course been hugely profitable for most large macro hedge funds through both 2025 and 2026. But many macro funds have struggled in traditional fixed income and foreign exchange markets.

Brevan Howard is one of the oldest and most storied names in fixed income macro hedge funds. Alan Howard famously never had a down year in his decade plus as an investment bank proprietary trader and navigated the GFC well. Howard runs very little money directly nowadays, and earlier last year I wrote about Brevan Howard’s investment performance struggles and its inability to compete with the big US multimanager platforms. Things haven’t improved since then.

Bloomberg recently reported that “the number of US stocks and exchange-traded funds held by Brevan Howard funds has more than doubled to nearly 2,000 since the end of 2024...the total market value of such bets has risen to about $9 billion as of the end of March, from $2.4 billion in December 2024.”

It also noted that equities and to a lesser extent commodities - two traditionally small areas for the firm – had driven most investment returns in 2025 and Q1 2026. Meanwhile, Brevan Howard took heavy losses in FX and rates trading, which have been its core competency over the years.

Bloomberg attributed the equities’ returns to one of Brevan’s star multi-asset managers but also noted that the firm has recently been building a team of equity sector specialists to filter trade ideas to Brevan’s multi-asset portfolio managers. With Intelligence had previously reported that Brevan was setting up an external allocation programme targeted towards long/short equity.

Brevan Howard is not the only major macro fund to expand in equities. Howard’s former partner Chris Rokos has been putting up industry leading returns for years and has done well in equity indexes and commodities. It has been hiring equity long/short PMs. With Intelligence reported late last year that Graham had hired a former Millennium equities PM and Taula was also hiring equities managers as it looked to diversify beyond its traditional FI background. Greg Coffey’s Kirkoswald, which focuses on EM macro, has also made much of its gains in equities and commodities.

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"When this man touches something, it turns to gold.” Jim Cramer.

The cult of Leopold Aschenbrenner got stronger this week as the Wall Street Journal once again profiled the young man beating all the experienced investors. He isn’t the only one to ride the AI boom. But his returns, AUM, lack of previous professional experience and youth have made him one of the most talked about people in Silicon Valley – almost as many fan boys and haters as Elon Musk has.

I am always fascinated by how the hedge fund industry stretches from highly leveraged, market neutral and diversified multi-strategy firms on hand to largely long only investors like TCI and Pershing Square on the other hand. But taking concentrated bets, especially including private companies, often requires the regulatory wrapper of being called a hedge fund.

Leopold’s Situational Awareness Fund is more like a TCI or Pershing Square than a classical hedge fund. Nevertheless, it has been the fastest growing firm in the industry over the last two years. It only has 8 employees including 4 investment professionals.

As we get ready for this week’s SpaceX IPO, I look at Leopold and the other money managers investing in public equities related to the AI theme.

Just like the Gartner hype cycle of new technology innovations, financial market sentiment tends to move in cycles. April and May 2026 have been the best months for technology hedge fund investors in decades, with the average tech portfolio up by 20%.

Of course, timing is everything. Who remembers Broadcast dot com, which Yahoo acquired for $5.7 billion in stock in 1999? Yahoo shut down the business a few years later, and it is considered one of the worst Internet acquisitions ever. However, Broadcast dot com’s largest shareholder, entrepreneur Mark Cuban, managed to hedge his risk to Yahoo shares by buying puts on the Internet index and then a collar. He walked away with more than $1 billion. Cuban rode the dot-com bubble and got off before it burst. A matter of months made all the difference.

Then there is the cautionary tale of Cathie Wood’s ARK Innovation Fund or previous one hit wonders like John Paulson. As a compensation model - like many hyped money managers - both worked well but their investors suffered for a long period of time.

With Jim Cramer of CNBC singing his praises, Leopold will be hoping he can escape the inverse Cramer effect!

Prince Leopold of the Valley

The people focusing on Leopold Aschenbrenner’s lack of investing experience are missing the wood from the trees. As are those questioning how much is alpha and how much is beta. No one can produce 1000% returns over 2 years, over 250% this year and grow AUM from $100 million in July 2024 to $20 billion today (source – Wall Street Journal) without having both alpha and beta in spades.

For all the Internet fan boys and trolls, the best frame of reference is Leopold’s interview with his friend Dwarkesh Patel from 2 years ago. This is just after he had raised money for his hedge fund from the likes of the Collison brothers, but before he started investing this money.

The interview is a marathon but if you listen to the start, the bit about his career or starting a hedge fund, you get what you need to know.

Leopold is clearly an exceptional individual. He started Columbia University at the mere age of 15 and did very well academically there.

He made a clear bet that AGI was coming, AI models would progress materially by 2027 and that this would create an insatiable appetite for computing power, relevant physical infrastructure and energy.

Leopold is well connected and benefited from being at the heart of the flow of information. His first job in Silicon Valley was working for the Future Fund, backed by Sam-Bankman Fried, who was a very early investor in Anthropic. Leopold then became a researcher at OpenAI.

Today, the largest single position for Leopold’s Situational Awareness Fund is $4 billion invested in Anthropic. Leopold’s fiancé is the chief of staff to Anthropic CEO Dario Amodei. Jane Street, which took over much of SBF’s Anthropic investment, is a major backer of Leopold.

Leopold starts his now famous June 2024 essay “SITUATIONAL AWARENESS: The Decade Ahead,” with the following line “You can see the future first in San Francisco.”

In summary, as Leopold tells Dwarkesh Silicon Valley is where it is happening, and you get a natural flow of ideas and information being well connected. Leopold’s friend Dwarkesh Patel is also flatmates with Dylan Patel who runs top research boutique SemiAnalysis and has a third flatmate that is an Anthropic researcher.

Leopold also talks about the importance of timing in the investments you make. His big pitch is that other companies beyond Nvidia would benefit from the boom, but he qualifies this by saying timing the revenue momentum is crucial.

As for the lack of professional experience, Ken Griffin started trading convertible bonds at Harvard University. Many great investors over time from Stanley Druckenmiller to Chris Hohn run concentrated portfolios. But Leopold’s willingness to run his winners is perhaps something a professional investor would not have done to the same extent, without checking themselves from a risk management perspective.

Moreover, the connectivity to information and fearless vision has been so much more important than grey hairs, when the backdrop has been a raging bull market.

Hedge Fund Alert wrote a week ago about Situational Awareness and another fund called Value Aligned Research advisors, both reaching $20 billion in AUM. The latter doesn’t have the star power of Leopold, but the Princeton New Jersey firm only had gross assets of $542 million a year ago, and today’s AUM is around $20 billion. Last year, the fund was 113%.

Tiger Cubs and, Cub of Cubs

By comparison to the new entrants the returns of the large technology focused hedge funds like Coatue, Tiger Global and D1 were relatively pedestrian in 2025, especially in their public equities’ portfolios. This is notable given their huge stakes in hyperscaler and semiconductor stocks.

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If we’re all going to eat, someone has to sell.” Ken Griffin

The three amigos or should I say frenemies that are SpaceX, OpenAI and Anthropic have been getting investment bankers and all sorts of other advisors salivating all year.

This week’s news that ratings giant S&P was not going to fast-track mega caps IPOs into index inclusion was so significant and against the grain of expectation that I decided to change the content this week, so apologies for being a day or two late.

Moreover, there is just so much going on with this IPO. Share prices may have plummeted on Friday, but the music is playing, so Elon Musk is dancing, with last minute announcements of big new contracts. He needs revenues for the IPO momentum, and it doesn’t matter where it comes from.

Anthropic came first. Now Google. Has it been long enough since the court case for him to try and sell computing capacity to Sam Altman and OpenAI?!

In this piece I look at the SpaceX IPO from the perspective of:

• The investment banks,

• Financial market infrastructure providers,

• Hedge funds, trading and index rebalancing.

Party like its 1999

My first full time job was as a TMT equity research analyst in 1999 in London at Credit Suisse First Boston (CSFB). The dot com boom was in full flow. A senior analyst I worked for even upgraded his price target twice in one day on a company we were investment bankers to, something I have never seen in decades. The first time was a revenue and earnings forecast upgrade. But the second time he just couldn’t justify changing forecasts again with no incremental news flow that day, so he added an “option value” to get the target price high enough. That was nicely above where the share price had increased to.

Part of my graduate training was a lecture from valuation guru Aswath Damodaran (less famous back then) - who just wrote up his thoughts on SpaceX, but what sell side analyst cared about valuation in 1999. I still remember the first bonus I ever received as a 22-year-old, which was a direct payment for writing research on an Internet IPO.

Around the same time, CSFB paid hundreds of millions of dollars to hire legendary tech banker Frank Quattrone and his team, who had demanded total autonomy and that the equity research analysts covering tech stocks would report to the investment bankers directly. Morgan Stanley had refused this a few years earlier, but CSFB hungry to play with the big boys was game.

The Spitzer settlement following the dot com bubble created more stringent rules around how much marketing sell side research analysts could do of deals. It’s been well over a decade since I was an analyst but reading the headlines this week reminded me of how some things have changed, but others are the same.

Of course, with so much on the line, it isn’t that surprising to see all the stops coming out with announcements of compute deals with the likes of Anthropic and Google. I will let others opine about whether these are merely short-term to support the IPO, with what margin structure and what long-term value (which impacts the multiple on them).

But what is clear is that sell side equity research has never been more dependent on investment banking. These high touch cost centres remain very expensive to run with a shrinking number of buy side clients. Markets’ revenues at investment banks are booming but more driven by financing and derivatives.

And no one wants to drop the ball on SpaceX. There is the obvious threat of facing the wrath of the world’s first trillionaire, his friends in Silicon Valley, DC and the army of online devotees. But even more is the risk that if SpaceX fails to enter the stratosphere, then the OpenAI and Anthropic IPOs will be delayed.

S&P, Nasdaq, market infrastructure providers and conflicts of interest

The need for the party to keep going extends not just to investment bankers and analysts but also other in the capital markets ecosystem, which is why the S&P move surprised the market so much.

The always thoughtful Toby Nangle over at FT Alphaville provided a good brief summary of the drama ending his piece with “All this got us wondering: is passive the new active?”

AUM has grown for all the indexes relative to the below chart but it gives a good illustration of how S&P in green was the lonely stand out amongst index providers. The ones in light blue had low requirements, and most of the other index providers introduced a new fast track for mega cap IPOs.

CRSP replaced its 10% minimum float rule with free float-adjusted market-cap criteria, allowing companies with low free floats that previously would have failed the screen to become eligible. But the CRSP index complex does tend to have rules to minimize impact by having changes implemented more gradually than other index providers.

By contrast, Nasdaq has made more wholesale changes to its flagship Nasdaq 100 Index. Unlike the S&P Indexes, it never had a profitability requirement. Moreover, it substantially reduced the waiting period after the IPO date that a mega cap could be added to the index, as well as abandoning its minimum free float requirement.

Although Nasdaq is known as an exchange group, it has been on a decade long journey to become more of a solutions provider and tech company. This has included several large and expensive acquisitions, but one shining light from its original product set has been its index business. This is not surprising given the booming stock markets and a red-hot demand for tech stocks.

Nasdaq Q1 2026 Index revenues of $220m grew 14% year-on-year and the chart below shows the rapid recent growth. But at the same time, as the earlier FT Alphaville chart illustrates, its flagship Nasdaq 100 index remains a minnow, when compared to its US stock index peers.

The Nasdaq 100 only includes stocks that are listed on Nasdaq. Delaying index inclusion for SpaceX would have risked the wrath of Musk and losing the SpaceX IPO to NYSE could have easily created momentum for the latter to grab OpenAI and Anthropic. Although revenues from new listings are small in comparison, these 3 mega caps would over time be amongst the most highly traded stocks on the exchange given their volatility, news flow and cult following. There would be market data revenues as well.

But losing the SpaceX IPO would have also meant that the Nasdaq 100 would never have SpaceX in it. Hence, the damage would be twofold: to Nasdaq as a listing venue but also to its index business. Nasdaq didn’t have the choice that S&P had to wait and then add SpaceX later to the index.

S&P indexes have always maintained a higher standard of governance than other US indexes. But more than Nasdaq, they will also remember the GFC when their ratings agency business survived far more unscathed than anyone expected. In the example of Tesla, S&P had also delayed its inclusion in the S&P500.

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