Hedge fund Exodus Level quarter-end efficiency lifted by foundation commerce, letter says By Reuters

By Nell Mackenzie

LONDON (Reuters) – Hedge fund Exodus Level was up about 2% for the yr to the tip of March, based on a letter it despatched to buyers, benefiting from a bond market basis-trade that has regulators anxious about monetary stability dangers.

Foundation and charges buying and selling kind over a fifth of the buying and selling technique’s threat allocation on the $11.8 billion fund, the letter seen by Reuters this week confirmed.

Exodus Level is a multi-strategy hedge fund housing many alternative buying and selling strategies. It employs a move by way of charge mannequin the place buyers cowl fund bills together with staffing and expertise prices. As well as, buyers additionally pay a 20% efficiency charge.

Multi-strategy hedge funds have had a constructive begin to 2024, with Exodus Level multi-manager friends like Schonfeld posting a 6.2% efficiency in its flagship fund and its bigger competitor Citadel, with a 5.75% return in its flagship Wellington fund, Reuters reported on April 4.

Whereas Exodus Level makes use of foundation and inflation trades in U.S. Treasuries, it additionally made cash from authorities bond buying and selling in Japan and Europe, the letter confirmed.

Rising market and trades primarily based off of macro financial drivers contributed probably the most to the constructive efficiency. This included forex buying and selling in Asia and Latin America, in addition to commodities trades in metals and power, the letter additionally confirmed.

Regardless of the fund’s total constructive outcome, quantitative buying and selling which makes use of algorithms, detracted, the letter mentioned.

Exodus Level didn’t instantly return a request for remark.

Foundation trades, a preferred commerce with the most important hedge funds, exploit the distinction between any money instrument and a spinoff primarily based on it – such because the commerce which has caught regulators’ attentions, shopping for U.S. authorities bonds and promoting futures contracts primarily based on them.

The Financial institution for Worldwide Settlements warned final yr that the large build-up in speculators’ Treasuries positions “is a monetary vulnerability.”