Thu. May 19th, 2022

Welcome back to FT Asset Management, our revamped newsletter on the movers and shakes behind a multitrillion-dollar global industry. This article is an on-site version of the newsletter. Sign in here to have the newsletter sent straight to your inbox every Monday.

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The pandemic battle for top traders

Hedge fund winners from the coronavirus pandemic do not get much bigger than Millennium Management.

Izzy Englander‘s New York-based fund made 25.6 percent last year, its best performance in two decades, and rose more than 10 percent by the end of October this year. The firm’s assets have grown by $ 20 billion since the beginning of 2020, and its strong position is such that it is even trying to includes investors’ money for longer.

Rival Citadel, under leadership of Ken Griffin, is also growing rapidly. It made double digits this year as well as last year, adding more than $ 13 billion in assets.

These so-called multi-manager funds, which include New York-based ExodusPoint, Balyasny and Steve Cohensay Punt72, employs tens or hundreds of small teams of traders trying to make money. So as their assets grow, they need to find more traders. With the overall sector swelling by more than $ 100 billion during the pandemic, a bitter war for talent is now underway, reports my colleague Laurence Fletcher in this must-read analysis.

Here, one Millennium Portfolio Manager describes the configuration:

“It’s black and white. You know the rules of the game. Millennium tells you that they want to empower you; transfer your business and your team and we will take care of compliance, administration, trading systems, etc. At a time when starting your own hedge fund is becoming more expensive and more complex, it really resonates. ”

A top trader at one of these multi-manager funds can now expect a lucrative package that includes a base salary of $ 250,000 to $ 400,000, plus 20 percent or even as much as 25 percent of their trading profit. But wage inflation is most acute in so-called buyouts. This is the amount that a competing firm will have to guarantee to pay the trader to compensate them for the bonus they give up and for lost earnings during their notice period. It can reach $ 10 million, or even in rare cases a cool $ 20 million.

In this murderous environment, companies are as accommodating as they can be. Citadel opened offices in Paris and Singapore last year. Meanwhile, Millennium will be hiring a dealer from wherever they want to be based, and this year has opened offices in Palm Beach and Miami. This is in line with the likes of Black stone, Elliott Management and Japanese group SoftBank in moving jobs and investing to South Florida, in the pursuit of sun, space and lower tax.

But if you pay such exorbitant amounts, how do you really know if you’re stripping a competitor’s top dealer, or simply a freelancer driving on a colleague’s proceeds? As one CEO remarks, “everyone can show you a good record” during interview. The answer, he said, is to place spies within the competing firm. These second pair of eyes can point you to the right choice of talent.

As Joseph Heller entered Vangs 22: “Just because you’re paranoid does not mean they are not after you.”

The Netflix of retail?

The acquiring Martin Gilbert is no longer sending Abbrn, but the transaction does not appear to have dried up. The group announced Thursday they have struck a £ 1.5 billion deal for sale Interactive investor, the UK’s second largest funds supermarket.

Abrdn has competition from rival suitors, including Barclays, and the target’s decision to sell trumps its previous plans for an initial public offering early next year.

The acquisition is the bravest step to date by Abrdn’s Stephen Bird since he took over as CEO just over a year ago. He bets that Interactive Investor’s exposure to the fast-growing army of retail investors can help the FTSE 100 Asset Manager re-energize.

Interactive Investor’s monthly fixed fee pricing model has helped it attract 400,000 clients. It illustrates how a simple pricing structure made popular by Netflix, Spotify and Peloton is now making headlines in the market for wealth management. “Customers want a simple do what it says on the can type offer,” says Bird. “Interactive Investor has really made a breakthrough in this and that’s one of the things we really like about it.”

Meanwhile, Interactive Investor’s CEO Richard Wilson, who accepted the final calls to clinch the deal while hosting the company’s Christmas party in Leeds on Wednesday night, said that jumping straight into an agreement with Abrdn had preceded the inevitable march of consolidation in the UK welfare sector.

Even if Interactive Investor went public, “it’s just as likely that you would have another big deal in another year,” Wilson said. “The UK wealth market is in the midst of a very significant consolidation and structural change that has just begun.”

Chart of the week

US retail investors pile on sales generated by Omicron

Traders have taken advantage of stock market declines over the past week to Picking up US stocks, even if there remain questions about the new Omicron coronavirus variant and the future direction of monetary policy. Investors poured $ 10 billion into equity funds holding U.S. stocks in the week to Wednesday, building on a 10-week inflow range, according to data provider EPFR.

Seven indispensable asset management stories this week

Omicron and US monetary policy uncertainty is turbulent world markets. Equities and bonds are spinning as traders decipher conflicting signals about the economic outlook.

Alberto Foglia, hedge fund manager, 1928-2021. Obituary of industry pioneer and longtime chairman of George Soros‘s Quantum Fund, one of the most successful funds of all time.

Activism will enter a “golden era” across Europe next year, while low valuations and heightened ESG concerns mean UK companies are the most vulnerable targets, According to Alvarez and Marsal.

Phoenix Group, Britain’s largest provider of long-term savings, has called on ministers to reform EU solvency rules that still apply in the UK to help £ 50 billion in investments.

Entrepreneur Andy Bell, which started AJ Bell funds supermarket in 1995, plans to monetize a generational shift among retail investors by launching a zero-commission investment application next year.

Activist Dan Loeb | was himself attacked by activists at his London-listed nutrition fund Third Point Investors. But last week he achieve a victory in its battle with rebellious investors Asset Value Investors.

Large funding deficits drive pension plans to plow money in private assets in the pursuit of returns, which increases the risk of overcrowded transactions and muted profits, according to a report by Amundi and Create research.

And finally

Detail of Mrs Mary Robinson (Perdita), 1781, by Thomas Gainsborough. The painting is part of the Wallace Collection, London. © Getty

Behind the horrors of the Oxford Street Christmas shopping crowd is the Wallace Collection. It is home to three portraits of Mary Robinson, a mistress of the Prince of Wales, later George IV. She is often known as Lost for her portrayal of that character in William Shakespearesay The Winter Story. One of the portraits in the Wallace collection is by Joshua Reynolds and a second is over Thomas Gainsborough. Who painted the third one? The first person to email me with the correct answer wins a special prize.

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