Any Hedge funds that specialize in warfare?
Recently I have been reading about Nathan Rothschild's bond plays in the 19th century. Basically invented arbitrage by transporting gold across enemy territory to sell for higher in a different city. Made his wealth by predicting the outcome of the war. Didn't invest in the South's cotton backed securities in the civil war because the North took New Orleans-no way to claim the collateral cotton if the South defaulted.Are there any hedge funds today that have strategies involving warfare? I would imagine that a team of rates traders, military strategists, and quants for economic forecast could make a powerful strategy.
This is an all-time topic header for sure
lol ya investors would love funding warfare activity
Not really. Big wars dont happen that often globally where there is a resolution/point of inflection/meaningful directional change in a 6month to 1.5yr period which is what you’re typically looking at in the HF world. Also by definition, wars are pretty unpredictable. It’s probably more akin to sport betting than it is to investing.
A lot of these wars that do happen in emerging markets are small and in niche markets where it’s difficult to even find a relevant asset class to express that view- let alone try to scale it at size. Huge liquidity constraints.
Or maybe sometimes you do find an asset class like say oil (price went up because of Ukraine/russia etc) But wait a sec you end up realising there are billion other factors driving oil and not just warfare which is your ‘speciality’.
Bottom line is yes in theory you can profit but at scale it’s probably not going to work and majority of this will fall under geopolitical risk which macro and commodities desks look at. They outsource the war knowledge to people who claim they are war experts and that’s it.
Funds are literally raising capital for the opposite of this dude. Avoid tobacco, warfare, alcohol etc.
Yes, they're highly clandestine though and pipeline candidates exclusively from Special Situations groups (in case you were wondering what those teams did).
Firm pays for Black Hawk rides home if you work past 8
I don't believe any hedge funds specialise exclusively in warfare, but certainly many global macro hedge funds make trades related to their view on how wars will unfold.
Take CQS for example, of which the founder Sir Michael Hintze has a military background himself. Back in 2015 they made a number of military related hires: General Lord Richards, Chief of the Defence Staff of the British Armed Forces from October 2010 to July 2013; James Shinn, Assistant Secretary of Defense for Asia at the Pentagon from 2006 to 2008; and Harvey Pitt, who oversaw the Securities and Exchange Commission's response to financial markets' reactions to the 9/11 terrorist attacks in New York during his time as the regulator's chairman from 2001 to 2003.
Military expertise, as well as geopolitical, economic, regulatory, etc., allow a hedge fund to develop an informed view of how global macro events (incl. war) will unfold, and make profitable trades accordingly.
lol.
That said, as a history buff I kind of see where you're coming from. Look into physical commodities trading:
https://www.bloomberg.com/news/features/2016-06-01/giant-oil-trader-vit…
If you like this article read Blas' The World for Sale. Commodities traders often deal in hot spots where local geopolitics and hence warfare can matter a lot.
That said that's not at all what these guys (and gals) do on a daily basis. A good intro of what the day-to-day is more about is this:
https://www.commoditiesdemystified.info/en/
That's true, cuz these folks (what I would controversially call the 'dogmatic folk' - Klarman, Marks, Greenwald etc) don't fish in the rates, commodities, FX etc pool in the 1st place cuz they think these assets have no intrinsic value (note the diff between intrinsic value and fair value - rates and FX defo have fair value) cuz they don't spit out cash flow. They fish in equities, real assets, bonds - things that have intrinsic value, and they don't use macro forecasts, let alone frankly unpredictable things like political outcomes or even wars. (note the famous study where the average prediction of many political science experts is no diff from an avg Joe chatting shit)
For asset classes like rates, obviously different styles apply.
A few points
- FX/rates most definitely both have cashflows…it may not be easy to to determine fair value but they most certainly have cashflows (I get that you’re posting their view so this is more push back against them but the reason those fundamental investors don’t invest in them is bc it is a very different skillset)
- successful investing based on political outcomes also includes policy stances which you have to take into account in macro products- this is far more robust that your retail election driven stock selling example and it is not about discrete forecasts like your political science example but instead thinking in terms of probability distributions and what is priced into to current assets
- this is generally mostly applicable to assets where politics is a major drive of value I.e. not US large cap stocks but instead think Ecuador sovereign bonds (niche, but a tradable asset nonetheless)
Totally agree that investing in US stocks based on politics is foolish but I wouldn’t broad brush the idea macro forecasting, political analysis and non equity products cant generate alpha as these dogmatic folks suggest …who knows the next thing people might say is buying undervalued stocks based on value investing principles underperforms growth and indices bc it is an outdated form of analysis…wait
The United States Congress
Bobby axelrod 9/11 trade vibes