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...

Alberta’s controversial public investment fund (AIMCo) has secured Mark Wiseman — a Canadian pension guru fresh off his own controversy — to lead its board of directors starting next month, the organization said. 

Wiseman built a sterling reputation and an enduring legacy at the Canada Pension Plan Investment Board, which he built into a global powerhouse as chief executive officer. But his next position — BlackRock’s global head of active equities and potential heir to Larry Fink — ended badly. 

Fink ousted Wiseman last December for failing to disclose a romantic relationship with a colleague. Wiseman also quickly stepped down from the board of FCLTGlobal, the nonprofit group he helped found to promote long-term thinking in investing and business.  

The Alberta appointment marks a return to the public eye and institutional investing’s power elite.

“He’s such a well-known figure in Canada and in investment...

Research has shown that active managers produce persistent excess returns on their best ideas — but they squander these returns by relying on overly diversified portfolios. Now, a new start-up is purporting to have a solution to this long-running problem. 

Melius Investments, founded by finance veteran Tim Mullaney, is betting that active management can be saved by using well-known artificial intelligence techniques that have improved results in everything from vaccine development to hurricane prediction. 

Melius, a registered investment adviser, has developed a set of model investment portfolios and is pitching them to institutional investors, including pensions, and wealth managers as an alternative to both existing active and passive managers. The portfolios leverage a couple of recent innovations, including recent research published by the CFA Institute.

That research found that in active portfolios, alpha-generating...

Andrew Junkin is taking the helm at the Rhode Island investment office, making the move about three months after Wilshire Associates announced he was leaving his role as president of its consulting business.

Rhode Island’s treasurer said this week that Junkin began serving as chief investment officer of the $8.4 billion state pension fund portfolio on June 22. He replaces Alec Stais, who stepped down in May to become CIO at Providence Health & Services, according to his LinkedIn profile. 

Junkin spent 15 years at Wilshire, serving on the company’s board for five years before the firm announced his departure in March. He was president of Wilshire Consulting since 2015.

“I look forward to working with Treasurer [Seth] Magaziner, his team, and members of the State Investment Commission,” Junkin said in the office’s statement on his hiring. “I share their commitment to ensuring that Rhode Island’s pension system continues...

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 starting in 2014, Malachite founders Jacob Weinig and Joe Aiken were 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...

A member of the California Public Employees’ Retirement System board has sued the  organization, the board, and the board’s president to court over a dispute stemming from her Twitter account.  

Margaret Brown, elected to the CalPERS governing body in 2018, claims that board president Henry Jones disciplined her for using the word “CalPERS” as a part of her Twitter account name, email address, website URL, and Facebook handle. She is asking the court to compel CalPERS to rescind the discipline and provide her with an opportunity for an administrative appeal hearing.  

Brown has previously been critical of the organization on social media, particularly around the tail-risk hedge that CalPERS unwound in January. 

[II Deep Dive: CalPERS CIO Called Out By Ex-Head of Tail-Risk Program]

Jones said via email that the suit “has no merit” and distracts the board from doing its job.

Pension...

Two in three institutional investors agree: The stock market’s recovery is overblown.

According to this week’s II Fear Index, 65 percent of asset managers and allocators believe the long-term impacts of Covid-19 have not been sufficiently factored into stock markets. Their views were recorded between June 18 and June 22, as U.S. stock markets continued to hover just short of pre-pandemic highs, despite rising numbers of infections in parts of the country.

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 starting in 2014, Malachite founders Jacob Weinig and Joe Aiken were 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...

Amazon.com, the e-commerce giant led by its founder Jeff Bezos, announced Tuesday that it has created a $2 billion fund to invest in companies moving the world toward a low-carbon economy. 

The Climate Pledge Fund will back businesses of all sizes, including startups and established companies seeking scale, Amazon said in a post on its website. The venture investment program will initially target industries such as transportation, energy generation, storage, and agriculture. 

“Low-carbon solutions need to be developed in all sectors of the global economy,” Amazon said on its website. The Climate Pledge Fund “will consider investments in companies developing products or services that reduce carbon emissions and help preserve the natural world.” 

Amazon, which has begun seeking expressions of interest from companies, is aiming to reach net zero carbon emissions by 2040, according to its statement Tuesday. As part of this...

Two in three institutional investors agree: The stock market’s recovery is overblown.

According to this week’s II Fear Index, 65 percent of asset managers and allocators believe the long-term impacts of Covid-19 have not been sufficiently factored into stock markets. Their views were recorded between June 18 and June 22, as U.S. stock markets continued to hover just short of pre-pandemic highs, despite rising numbers of infections in parts of the country.

There’s a yawning gap between the promise of equity long-short funds and the reality of their performance. Many managers of equity long-short funds pitch the product as giving investors two-thirds of the upside and only one-third of the downside of equity markets. 

But an analysis of the five years through the end of March shows a far different story. Investors in the average equity long-short hedge fund saw gains that represented about one-quarter of the upside in stock markets and 100 percent of the downside of equities, according to upcoming research from Andrew Beer, managing member of liquid alternatives firm Dynamic Beta Investments. Investors, of course, invest in these funds to protect their portfolios during stock market declines.

“The idea that investing in a single equity long-short manager is less risky than investing in the market is categorically untrue,” said Beer, in a phone interview.  

For the five years...

A member of the California Public Employees’ Retirement System board has sued the  organization, the board, and the board’s president to court over a dispute stemming from her Twitter account.  

Margaret Brown, elected to the CalPERS governing body in 2018, claims that board president Henry Jones disciplined her for using the word “CalPERS” as a part of her Twitter account name, email address, website URL, and Facebook handle. She is asking the court to compel CalPERS to rescind the discipline and provide her with an opportunity for an administrative appeal hearing.  

Brown has previously been critical of the organization on social media, particularly around the tail-risk hedge that CalPERS unwound in January. 

[II Deep Dive: CalPERS CIO Called Out By Ex-Head of Tail-Risk Program]

Jones said via email that the suit “has no merit” and distracts the board from doing its job.

Pension...

Two in three institutional investors agree: The stock market’s recovery is overblown.

According to this week’s II Fear Index, 65 percent of asset managers and allocators believe the long-term impacts of Covid-19 have not been sufficiently factored into stock markets. Their views were recorded between June 18 and June 22, as U.S. stock markets continued to hover just short of pre-pandemic highs, despite rising numbers of infections in parts of the country.

Amazon.com, the e-commerce giant led by its founder Jeff Bezos, announced Tuesday that it has created a $2 billion fund to invest in companies moving the world toward a low-carbon economy. 

The Climate Pledge Fund will back businesses of all sizes, including startups and established companies seeking scale, Amazon said in a post on its website. The venture investment program will initially target industries such as transportation, energy generation, storage, and agriculture. 

“Low-carbon solutions need to be developed in all sectors of the global economy,” Amazon said on its website. The Climate Pledge Fund “will consider investments in companies developing products or services that reduce carbon emissions and help preserve the natural world.” 

Amazon, which has begun seeking expressions of interest from companies, is aiming to reach net zero carbon emissions by 2040, according to its statement Tuesday. As part of this...

When Covid-19 sent China — and then the rest of Asia — into lockdown, JPMorgan Chase & Co. was one of the first to make the switch to virtual corporate access.

“I believe we probably held the first virtual event globally,” said Ryan Holsheimer, the bank’s Asia Pacific head of cash equities and equity distribution. “We had a conference in Shenzhen in February, right as things were starting to get cancelled and travel plans were thrown into disarray. We quickly moved the conference from physical to virtual, and we had 200 investors attend that virtually.”

Since then, everything has gone virtual — a new normal that Holsheimer and other corporate access leaders expect to last at least through the end of this year, if not longer. According to Holsheimer, JPMorgan has moved all of its conferences for the rest of the year online, while adding conference calls and other virtual meetings to meet a surge in demand from investors who are tuning in...

Trend-following strategies have earned a reputation for outperforming during periods of crisis. That theory was borne out during the height of the Covid-19 crisis — up to a point.

In a new paper entitled “The Coronavirus Crisis: What is the same? What’s different?,” Katy Kaminski, chief research strategist and portfolio manager at quantitative investment firm AlphaSimplex, analyzed nine substantial drawdowns in equity markets since 1998. The paper classified drawdowns into two categories: corrections, for losses of 15 percent over periods of two months or less, and crises, for more sustained, deeper losses. 

Kaminski and AlphaSimplex junior research scientist Ying Yang concluded that the Covid-19 market crisis was “one of the fastest crisis periods in history.” They found that short-term, pure trend-following strategies proved better than other strategies — including other styles of trend-following strategies — at navigating the...

Toll roads, an area of infrastructure that investors typically view as safe, are looking a bit shaky.

Traffic has dropped 40 percent to 85 percent in the Covid-19 pandemic, depending on the road type and the stringency of efforts aimed at slowing the spread of the disease, according to an S&P Global report dated June 19. “With generally high fixed costs, many toll roads will not have much flexibility to maintain operating margins as toll revenues decrease,” the credit rater said.

S&P has lowered the ratings of several toll road operators since the outbreak of Covid-19, including in the U.S., Europe, and South America, while placing others on watch, according to the report. With no good precedent, the firm said it’s hard to estimate how well the industry — historically on the the stable end of transport infrastructure — may recover from the crisis.

“The pandemic upended that stability, with global traffic and revenues tumbling...

On Wednesday, March 25, a week after the Federal Reserve had stepped in to stabilize credit markets, J.P. Morgan banker Keith Canton called Reed Rayman, an Apollo private equity partner who focuses on technology investments, including e-commerce and online travel.

Canton knew that Barry Diller, the chairman of Expedia, had already drawn down his company’s revolving credit lines. Now Diller, who had forced out Expedia’s CEO and CFO in December over strategy disagreements, needed even more cash to make good on a possible $5 billion in refunds the online travel company owed to customers. 

On the phone, Canton told Rayman — who was working from home with two toddlers and no childcare — that Expedia needed a term sheet for up to half a billion dollars in ten days. Canton thought Apollo would finance the sheet despite never having invested in the company.

Two days later, Canton, who runs private capital markets for J.P. Morgan, called...

On Wednesday, March 25, a week after the Federal Reserve had stepped in to stabilize credit markets, J.P. Morgan banker Keith Canton called Reed Rayman, an Apollo private equity partner who focuses on technology investments, including e-commerce and online travel.

Canton knew that Barry Diller, the chairman of Expedia, had already drawn down his company’s revolving credit lines. Now Diller, who had forced out Expedia’s CEO and CFO in December over strategy disagreements, needed even more cash to make good on a possible $5 billion in refunds the online travel company owed to customers. 

On the phone, Canton told Rayman — who was working from home with two toddlers and no childcare — that Expedia needed a term sheet for up to half a billion dollars in ten days. Canton thought Apollo would finance the sheet despite never having invested in the company.

Two days later, Canton, who runs private capital markets for JPMorgan, called...

“Crises often accelerate or accentuate existing trends,” says Brunno Maradei, CFA, Global Head of Responsible Investment, Aegon Asset Management. Certainly, few crises can match the two-headed monster of global pandemic and economic strain the world has experienced almost from the outset of 2020. Among the new normals that may come starkly into view when the all-clear sounds is that ESG integration is likely to be considered foundational to assessing a company’s ability to weather major disruption. II recently spoke with Maradei to get his take on the role of ESG integration during a crisis and how focused responsible investment strategies have performed amidst the turmoil – and what the future may hold for them. 

Investors have been on a wild ride lately. Skeptics of ESG and responsible investing have often said such strategies aren’t cut out for tough market conditions. What’s your response to that?

Challenging markets can provide an...

As Major League Baseball negotiates the start to its season in the Covid-19 pandemic, stadiums are empty. That has a niche corner of the municipal bond market under pressure, according to UBS Group.

The New York Mets and New York Yankees service their stadium finance debt partly through ticket sales, putting the teams in a challenging position, said Jeannine Lennon, municipal credit strategist at UBS, in a phone interview Thursday. S&P Global this month lowered the ratings of bonds tied to the Mets to one rung below investment grade, and in late March placed Yankee Stadium’s bonds on “watch negative” on Covid-19 concerns. 

S&P said in a March 23 report that it unclear when the baseball season would start or how many games would be played, citing the “significant possibility that the ultimate impact on the season could be worse” than the MLB was anticipating. Lennon wrote this week in a UBS research note that the league expects to...