Hedge fund job fears after a tempestuous week
It wasn't so long ago that we were suggesting that Dubai hedge funds were the post-bonus power move for 2025. Times have since changed, and not just in Dubai.
💥Follow us on WhatsApp for news alerts.💥
Following the gyrations of the past week, the market is alive with reports of large losses in fixed income funds globally. There are no names that we can publish, yet, but the drawdowns at some multistrategy funds are rumoured to be significant. "This war was a huge black swan and vol shock," says one managing director on a macro trading desk in London. "Big losses are inevitable as a result."
The multistrategy hedge funds which are rumoured to have been afflicted by these losses said they don't comment on intra-month performance. Losses are problematic for portfolio managers working there. Hedge funds are notoriously averse to drawdowns and will cut capital allocations and seats with varying degrees of ruthlessness once 5% or more of capital has been lost. And once a drawdown has occurred, it's necessary to make the money back before you're eligible for a bonus.
"People have lost a tonne of money," says the MD. "A lot of these guys who left banks for hedge funds are going to lose their jobs." At least one senior trader who only recently moved from London to Dubai with his family is thought to have been let go. It doesn't seem to have helped that some portfolio managers were ill, or spent part of the day in shelters as markets were moving.
Macro portfolio managers are likely to be particularly exposed. Macro returns can be volatile at the best of times. Rokos Capital Management, for example, posted a 26% loss in its macro fund during the pandemic in 2021, followed by a 15% gain in 2022.
"There are losses in front end rates after the market sold off due to inflation expectations rising on the back of the oil prices," says one senior trader. "The market wasn't positioned for this. Inflation was coming down and central banks in the UK and US mainly were expected to cut rates. Now they may even have to hike."
With the UAE no longer the safe zone it was, the deputy head of one fund tells us that his staff are being given the option to relocate out of the region to other offices. So far, he says that only 50% are interested, though. It helps that Dubai residents can spend six months outside the country before their residency there is nullified.
The potential for big losses and job cuts at hedge funds could be good news for banks, which have struggled to retain macro traders in the past few years. UBS in particular, is thought to have big gaps on its London rates desk following departures.
Some senior traders say they still want to move to hedge funds though. "The market has great opportunities if you are not down and have capital. It's good to join now when others are nursing wounds and can't take risk," says one.
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Signal: sarahbutcher.22 Click here to fill in our anonymous form, or email editortips@efinancialcareers.com.
Bear with us if you leave a comment at the bottom of this article: comments are moderated intermittently by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. You must take sole responsibility for comments you post on this site. We will take reasonable steps to weed out anything that we consider to be offensive or inappropriate.
