Millennium's Merger Arb Team Shutting Down
https://www.bloomberg.com/news/articles/2022-07-1…
Pretty common to see pods closing especially in today's market but seems like Elon screwed East53 lol.
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I have no material info on their team but this looks like a classic case of pod shutting down due to breaching risk limits after multiple bets went awry (not just TWTR).
Agree, but 3bn$ GMV is not any pod. Even for Millenium I think this is a big pod !
I think you're right on that.
MLP is making big promises and then slow rolling capital deployment from several folks I know. For example that article says they were 750mm gross deployed which is not big by any means.
Encouraging PMs to build big infrastructure and then not ramping capital as quickly.
I know a handful of folks who have been promised 2-3-4bn of gross over the last 1-2 years and no one is close to that yet
Aren't most pods multi-bn gross at the MMs?
They’re not alone. A handful of places / pod shops have parted w teams. See hf alert today.
Breaching risk limits is an odd way to say that they lost money
lol right...wonder what happens when you break your risk limits but make money...
More capital magically shows up.
This is mostly true - a lot of risk is model based and opportunities vary greatly. It is not practical or productive at all to micromanage traders in this sense.
The PNL drawdowns are more constraining though. If you are making money, they will mostly leave you alone to make the decisions because when you are up money, you are not just playing a traders option - when you lose money - you lose your bonus personally, so incentives are aligned with investors.
It gets a lot different if you are adding risk when down - that is a big no no
The irony is from what I know, merg arb pods are very popular due to their "boringness". Usually able to create stable returns with limited risk if the PM knows their stuff.
Merger arb stopped being easy 2 decades ago. As an assett class, it is also correlated with the general market, as positions are unwound in periods of volatility and spreads blow out across all deals.
Also this is only one of +270 pods.
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