Options trading may be a good predictor of stock returns — but investors should be wary of trying to profit from the unusual options activity regularly covered by CNBC’s “Fast Money,” according to researchers. 

“Our findings suggest that the CNBC coverage of unusual option activity has a destabilizing effect on underlying stock prices and investors cannot profit by simply following the CNBC reporting on the ‘smart money,’” Washington State University finance professor George Jiang and Cuyler Strong of the Securities and Exchange Commission said in a June paper. Strong, who conducted the research at the university before joining the SEC last month, declined to comment on the findings. 

The ‘Unusual Option Activity’ segment of CNBC’s “Fast Money: Halftime Report” prompts an “immediate spike in trading volume,” as investors react to commentators pointing to a few stocks with abnormally large option trades earlier in the day, according...

Perhaps the most fraught relationship in institutional investing is between Fortune 500 companies’ chief financial officers and their investment heads. One might imagine they’re on the same side, united as money folks. 

They are not. 

For CFOs, having a large enough pool of (usually) pension money to need an in-house investment team means a huge balance sheet item is out of their control, rising and falling at the whim of interest rates and markets, and impacting the company’s stock price. CFOs don’t usually like that.

Josh Smiley is an exception. An Eli Lilly company man for decades, Smiley ascended to the pharmaceutical firm’s C-suite at the start of 2018. Under him and chief investment officer Susan Ridlen, Lilly’s stock has doubled. Even pre-pandemic, the share had climbed from about $85 to more than $130 over the two years ending last December. 

And it happened with a thriving old-fashioned defined benefit...

Simon Pilcher, the first person in his family to go to university, was halfway through a degree in geology and metallurgy at Trinity Hall, Cambridge, before he realized that he wasn’t cut out for a life of academia — and switched into management studies.

“I’m not an intellectual,” he tells Institutional Investor from his house in leafy North West Essex, where he and his wife and four of their five adult children are sheltering and competing for the broadband.

“No, I’m not an academic,” he repeats. “But I like knowing a little about a lot.”

Pilcher has plenty to get his head around as the new chief executive of the investment arm of the Universities Superannuation Scheme, the U.K.’s biggest pension fund by assets, with about £73 billion ($91 billion) under management. Pilcher is in charge of the future livelihoods of almost all of the country’s academics working at U.K. universities established before...

After a stellar 2019, Citadel has been named the Institutional Hedge Fund Manager of the Year.

So far in 2020, the multistrategy hedge fund firm is earning that title.

Citadel’s flagship Wellington fund was up 10 percent for the year through April, according to Bloomberg, extending its win streak after delivering a 19 percent gain in 2019. Multistrategy funds as a whole fared much worse, according to HFR, which reported losses ranging from 1.93 percent to 7.76 percent across its multistrategy indices.

Across all strategies, hedge funds tracked by HFR were down 6.56 percent through April as the coronavirus pandemic rattled markets. At the end of May — the most recently available returns from the data provider — hedge funds were still down about five percent for the year.

It’s a very different result from 2019, when hedge funds as an industry delivered double-digit returns amid soaring stock markets. The winners of Institutional...

Portfolio hedges aren’t insurance, Ari Bergmann wants to point out.

Bergmann created some of the first derivatives while at Bankers Trust in the 1990s, and he is passionate that tail hedge managers are shooting themselves in the foot by trying to get investors to see the strategies as insurance with a small annual cost. “If you make money on insurance, you are an arsonist,” he said.

During an interview, Bergmann, who founded Penso Advisors in 2010 to provide risk mitigation strategies, got on a roll. “Why do you need insurance? The market came back. That tells you that you don’t need insurance. Insurance doesn’t help. Between the Federal Reserve and the government, you have the best insurance. That’s for free and the taxpayers are paying you.”

Brevan Howard owns a minority stake in Penso.

Tail-risk hedging funds are designed to profit from rare episodes like the global financial crisis or March’s Covid Crash. They took off in...

On May 25, financial adviser Josh Brown — or as he’s known on #fintwit, @reformedbroker — hit publish on what would become one of his most controversial blog posts. 

Entitled “Under Pressure,” the post opened with a lyric from David Bowie’s song, “Five Years”: “News guy wept and told us, Earth was really dying, cried so much his face was wet, then I knew he was not lying.”  Brown, the chief executive officer at Ritholtz Wealth Management, didn’t write the post to opine on markets or share his thoughts on the coronavirus pandemic, which he had done almost daily since the crisis began.  

Instead, he announced that the RIA firm, which manages nearly $1.3 billion per its latest form ADV, had received a loan from JPMorgan Chase & Co. under the U.S. government’s Paycheck Protection Program. The emergency program, known as PPP, was designed to cover two and a half months of employee payroll for small businesses during...

Alongside Bono, Richard Branson, and eBay founder Pierre Omidyar, private equity firm TPG launched the Rise Impact fund in 2016. The offering committed “to deliver positive and sustainable impact” while creating a “top-performing fund.” At the time, Bono remarked that “capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model.” Bain Capital followed suit, launching its own Double Impact fund, and KKR recently closed a $1.3 billion impact fund.

These efforts reflect a growing commitment to environmental, social, and governance practices by private equity firms and their limited partners. Speaking in 2019 at a forum on public aspects of private equity, Emily Mendell, former managing director at the largest association of LPs, noted, “ESG is critical. It’s critical to returns, it’s critical to value creation, it’s critical to our planet. It is also going to be critical to the PE...

The coronavirus pandemic will push investors to build fixed-income portfolios with technologies that aid their decision-making, according to Goldman Sachs Group’s asset management unit. 

“Speed is becoming alpha in this environment of fixed income,” Ashish Shah, co-chief investment officer of global fixed income and liquidity solutions at Goldman Sachs Asset Management, said Monday during an online event hosted by the bank. “If you are not able to operate your investment process rapidly, in real time, with high precision, you’re going to be at a disadvantage.” 

Fixed income has been a “slower player” in electronification and using factor-orientation in the construction of portfolios, according to Shah. Yet the need for debt investors to pivot quickly became clear earlier this year as markets moved from a coronavirus liquidity crisis into a recovery within weeks of the Federal Reserve’s emergency support.

“If you...

The Pennsylvania State Employees’ Retirement System board has voted unanimously to appoint Seth Kelly to the role of chief investment officer.  

Kelly, who stepped down as the CIO at the Missouri State Employees Retirement System (MOSERS) in December, is set to take the helm at PA SERS pending approval, the $31 billion retirement system announced Friday.  

PA SERS has been looking for a permanent CIO since August 2019 after Bryan Lewis, who spent four years as its investment chief, left to run investments at the United States Steel Corp.  

Kelly spent 16 years at MOSERS, nearly four of which as the retirement system’s chief investment officer. Prior to joining MOSERS, Kelly spent five years working in investments at a local Missouri bank, his LinkedIn profile shows. 

“His strong background in public funds, coupled with his record of leadership and achievement at our sister organization in...

Alongside Bono, Richard Branson, and eBay founder Pierre Omidyar, private equity firm TPG launched the Rise Impact fund in 2016. The offering committed “to deliver positive and sustainable impact” while creating a “top-performing fund.” At the time, Bono remarked that “capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model.” Bain Capital followed suit, launching its own Double Impact fund, and KKR recently closed a $1.3 billion impact fund.

These efforts reflect a growing commitment to environmental, social, and governance practices by private equity firms and their limited partners. Speaking in 2019 at a forum on public aspects of private equity, Emily Mendell, former managing director at the largest association of LPs, noted, “ESG is critical. It’s critical to returns, it’s critical to value creation, it’s critical to our planet. It is also going to be critical to the PE...

Malachite Capital Management embarrassed its hedge-fund rivals for years before facing its own fatal humiliation. 

In the gossipy and arcane world of volatility trading, just about everyone knows, and has an opinion on, everyone else. And in 2014, Malachite founders Jacob Weinig and Joe Aiken started making the others look bad.

Weinig and Aiken — a confident pair of former Goldman Sachs guys, which may be redundant — said yes to exotic trades with Wall Street banks, while their competitors studied the what-ifs and frequently balked at what they found. Malachite led the pack in insuring banks against infinite losses during an extreme stock-market crash, all in exchange for tidy premiums. The firm also borrowed money from banks — sometimes the same ones — to make far more of these trades. As a result, those tidy premiums became competition-topping returns and marketing gold.

The hedge fund raked in hundreds of millions of dollars...

Fusion Acquisition Corp., a blank check company chaired by State Street Corp. senior advisor Jim Ross, has raised $305 million for dealmaking in the asset management sector. 

Fusion priced its initial public offering at $10 a share, setting the stage for the New York-based special purpose acquisition company to hunt for a company with an enterprise value of $750 million to $3 billion, according to a statement from the SPAC on June 25. The total raised from the IPO will probably increase to around $350 million after the over-allotment option is exercised, Ross said Friday in a phone interview. 

Ross retired from State Street in March after 27 years with the firm, most recently serving as executive vice president of State Street Global Advisors and chairman of the asset manager’s global SPDR exchange-traded funds. He said he expects Fusion to take a company public in the next 18 months, having identified 200 potential targets in asset...

Jeffrey Ubben’s new socially responsible investment firm, Inclusive Capital Partners, officially launches on July 1 — but the veteran activist investor told Institutional Investor it will not be just another ESG fund.

“ESG has hijacked the conversation by selling a data-driven, benchmark-hugging passive product,” Ubben said in an email exchange with II. “We will be deeply analytical about how the core business can accelerate a healthier planet.”

Inclusive’s mission statement goes further, declaring that ESG has been “productized, dangerously adding fuel to fire with regards to the funds flow[ing] into the same few over-owned stocks.”

Ubben left ValueAct Capital, the firm he co-founded 20 years ago, to start the new company. He describes Inclusive as a return-driven environmental and social activist firm. 

It’s a remarkable about-face for the man who built ValueAct into one of the largest and best-known hedge fund firms by...

As established managers and mega funds increasingly dominate the private capital industry, certain investor protections may be becoming less common.

This includes no-fault divorce clauses, according to Preqin’s 2020 report on private capital fund terms. These provisions allow limited partners to remove and replace their general partner or terminate their limited partner agreement, even if the situation is not covered in the terms of the agreement.

Such clauses are considered “critical” by many limited partners, according to a recent survey by the Institutional Limited Partners Association. “While only 25 percent of respondents have experienced a GP removal within the last five years, ILPA members consider no-fault removal provisions to be an essential investor protection worth fighting for,” the group said in a report on the findings. “Whereas for-cause removal provisions can only be triggered by an unattainably high bar, no-fault...

CDPQ’s Mario Therrien and Man Group CEO Luke Ellis have been named Chair and Deputy Chair of the Standards Board for Alternative Investments. Why – and what’s the plan for the group and their industry?

The corporate bond market. Passive investments. Value stocks. Gold. What do they have in common? Over the past two years, experts have told Institutional Investor that each asset class is, if not dead, irreparably broken.  

This isn’t a new practice in financial media. However, a new paper from Research Affiliates delves deeper into the practice, finding that “pundits, prognosticators, and even investment boards” are quick to declare an asset class or investment strategy broken based on backward-looking data.  

“It’s called nowcasting,” said Amie Ko, vice president of product management at the firm. “You predict what will happen based on what happened in the past.” 

But, according to the paper, written by Ko and Research Affiliates partner John West, in the five years following these “broken” declarations, the asset class at hand “roared back.” 

According to Ko, the idea for the research came out of...

Malachite Capital Management embarrassed its hedge-fund rivals for years before facing its own fatal humiliation. 

In the gossipy and arcane world of volatility trading, just about everyone knows, and has an opinion on, everyone else. And in 2014, Malachite founders Jacob Weinig and Joe Aiken started making the others look bad.

Weinig and Aiken — a confident pair of former Goldman Sachs guys, which may be redundant — said yes to exotic trades with Wall Street banks, while their competitors studied the what-ifs and frequently balked at what they found. Malachite led the pack in insuring banks against infinite losses during an extreme stock-market crash, all in exchange for tidy premiums. The firm also borrowed money from banks — sometimes the same ones — to make far more of these trades. As a result, those tidy premiums became competition-topping returns and marketing gold.

The hedge fund raked in hundreds of millions of dollars...

Very few hedge funds are offering investors fee discounts during the coronavirus pandemic, according to a new survey by Seward & Kissel.

The law firm, which polled alternative investment firms about the impacts of Covid-19 on fundraising and remote work, found that less than 10 percent had granted investor-friendly concessions on fees, liquidity, or reporting terms. Roughly three-quarters of respondents managed hedge funds, while the rest ran closed-end vehicles such as private equity or real estate funds.

Steve Nadel, partner at Seward & Kissel, suggested that managers may be “more reticent” to grant concessions given how quickly markets have bounced back. High demand for opportunistic strategies may also contribute to why managers don’t currently feel the need to lure investors with discounts and other perks.

“With opportunistic structures, because they are bespoke and because they are limited capacity, it evens the playing...

Hedge funds are holding on to their Wirecard short positions, even as the company announces it has filed an application to start insolvency proceedings.  

According to short interest data provider Ortex, only 12.5 percent of Wirecard short positions have been closed in the past week. This leaves about 15 percent of its publicly available shares shorted, according to Ortex.  

Wirecard, a German fintech company, announced Thursday that it plans to start insolvency proceedings, which are akin to bankruptcy proceedings in the United States. This comes one week after the company announced that its auditors could not confirm the existence of the €1.9 billion ($2.1 billion) meant to be held in trust accounts.  

Since that revelation, Wirecard’s share price has plummeted: The stock closed at €104.50 on June 17 and closed on Thursday at €3.53 per share, a 96 percent drop. The Frankfurt Stock Exchange suspended...

Companies implementing social responsibility plans are twice as likely to enter activist hedge funds crosshairs as firms that are not addressing these issues. But management teams that are truly serious, not just greenwashing, about environmental, governance and other impact goals, may be able to avoid luring activists, according to new academic research. 

Investors are increasingly deploying money via ESG and impact frameworks. Even Jeff Ubben, founder of $16 billion ValueAct Capital, is quitting to start an impact fund. Skeptics have long believed that a financial crisis would reduce the amount of attention paid to what are often considered soft issues like board diversity or the environmental impact of manufacturing plants. But investors have actually doubled down on ESG strategies since the pandemic shut down economies in March.

For companies wanting to get in on those capital flows (or do the right thing), the new study sheds...

Malachite Capital Management embarrassed its hedge-fund rivals for years before facing its own fatal humiliation. 

In the gossipy and arcane world of volatility trading, just about everyone knows, and has an opinion on, everyone else. And in 2014, Malachite founders Jacob Weinig and Joe Aiken started making the others look bad.

Weinig and Aiken — a confident pair of former Goldman Sachs guys, which may be redundant — said yes to exotic trades with Wall Street banks, while their competitors studied the what-ifs and frequently balked at what they found. Malachite led the pack in insuring banks against infinite losses during an extreme stock-market crash, all in exchange for tidy premiums. The firm also borrowed money from banks — sometimes the same ones — to make far more of these trades. As a result, those tidy premiums became competition-topping returns and marketing gold.

The hedge fund raked in hundreds of millions of dollars...

Malachite Capital Management embarrassed its hedge-fund rivals for years before facing its own fatal humiliation. 

In the gossipy and arcane world of volatility trading, just about everyone knows, and has an opinion on, everyone else. And in 2014, Malachite founders Jacob Weinig and Joe Aiken started making the others look bad.

Weinig and Aiken — a confident pair of former Goldman Sachs guys, which may be redundant — said yes to exotic trades with Wall Street banks, while their competitors studied the what-ifs and frequently balked at what they found. Malachite led the pack in insuring banks against infinite losses during an extreme stock-market crash, all in exchange for tidy premiums. The firm also borrowed money from banks — sometimes the same ones — to make far more of these trades. As a result, those tidy premiums became competition-topping returns and marketing gold.

The hedge fund raked in hundreds of millions of dollars...