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Hedge fund CIO flags risks from ‘fragile’ market structure
Alexis Maubourget of ADAPT Investment Managers warns market shifts–passive funds, private assets, non-bank market makers, quantitative funds and retail trading–have made liquidity less reliable.
In the next market shock, “liquidity will dry up brutally and the market will almost stop trading”, he says. “I believe we’ll see liquidity-driven bankruptcies, or at least bankruptcies that are avoided only because central banks step in.”
ADAPT has excluded trades vulnerable to liquidity withdrawal from its portfolios and now favours being “long risk premia, long asymmetry, long convexity, long volatility, long optionality”.
UK insurers turn up leverage on structured gilt trades
Par-par asset swaps give way to higher-leverage structures as funding costs increase
UBS to launch merger arb QIS
Bank partners with German asset manager First Private to screen deals using machine learning
FSB warns of ‘circles of risks’ in bank risk transfer deals
Credit lines, portfolio financing and NAV facilities for private credit funds could rebound on banks
Custom index TRS booms at BlackRock
Isda AGM: Bespoke total return swaps span all mandate types but e-trading bottlenecks remain
Featured
Quants like Andrew Ang are making the case for AI agents
AI agents can boost human managers by analysing investments, risks and portfolio choices at scale
Iran confusion makes the case for causal modelling
A new test model built using Claude suggests oil prices may surge back above $100
The MIT professor giving LLMs a ‘brain scan’
Hui Chen’s research is yielding new ways to interpret – and steer – AI models
Valuing private equity analytically
A framework that includes liquidity and market completeness for PE valuation
New LLMs are proving to be surprisingly good quants
Strides in AI’s ability to do maths mean models can plausibly help with research
Inflation
Iran conflict squeezes hedge funds’ short inflation bets
Rising gas and oil prices have sent headline inflation soaring with some funds being stopped out
Citi launches core inflation QIS
Custom indexes eliminate energy and food prices to ease trading of stickier inflation trends
Sticky fears about sticky inflation
Risk.net survey finds investors are not yet ready to declare victory on inflation – with good reason
Decades of history says you can beat high inflation with quality
Factors such as momentum and value generally outperform the market irrespective of inflation, but new research suggests quality stocks are best when prices are rising rapidly
Counterparty Radar
Matchmaking and benchmarking for OTC derivatives
Counterparty Radar is based on position data from around 20,000 US mutual funds and ETFs, rolled up to the manager level – it shows the OTC derivatives they have on their books, and who they traded them with, providing unique insights into an important market segment. More info
BlackRock uses options to rewire AI bets
Counterparty Radar: Global Allocation Fund shifts from net short to net long derivatives as equity allocation falls
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