If you leave Goldman Sachs and work for a multistrategy pod shop hedge fund, your life may be fraught. Risk appetite at such funds is low; stop losses are non-negotiable. Commodities trading houses can be more tolerant, but do not expect a smooth ride there either.
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Ex-Goldman Sachs trader Yaoyao Liu has not had a smooth ride at Vitol. When a youthful Liu left Goldman Sachs in London after three years in 2012, he joined the world’s largest independent oil trader. This year has been harsh. The Wall Street Journal reports that the oil trading team lead by Liu at Vitol lost several hundred million dollars at the start of the latest war in the Middle East.
It’s not the first time that Liu has been bucked by markets. At the start of the COVID pandemic in 2020, the Financial Times reported that Liu and his team made a large loss of an unquantified magnitude. The team was betting that oil prices would rebound; they didn’t. Vitol’s net income reportedly fell by 70% in the first quarter of 2020, for reasons that were unclear.
If Liu and his team were at a multistrategy hedge fund, this might have been the end of it. They would likely join the procession of traders rotating between major funds. Instead, they’re still there at Vitol, where they seem to enjoy a high degree of protection.
The WSJ says that Liu – who is based in Dubai (or at least was until recently), runs a kind of internal hedge fund at Vitol. He makes huge bets on commodity derivatives and he benefits from the market visibility afforded by Vitol’s physical trading business. Vitol reportedly keeps Liu’s positions secret internally: colleagues do not know what they are. Unconfirmed speculation suggests that his team’s recent losses might be related to bad bets that diesel would rise relative to jet fuel, or that Dubai crude might fall versus benchmark Brent.
Vitol’s willingness to stick with Liu through the big downs is almost certainly related to his big ups. In 2022, Liu reportedly made $2bn in trading gains amidst Russia’s invasion of Ukraine. This was less than Citadel’s $8bn of commodities trading gains for the same year, but it was not inconsequential.
Liu’s big profits mean that big hedge funds want to hire him. Liu presumably doesn’t want to move and be spat out for breaching funds’ tight risk limits.
The WSJ reports that Liu has already made back “some of the [recent] loss” and that Vitol as a whole is up for the year. Nonetheless, Bloomberg reports that Vitol has been “reorganizing” its London derivatives team and that some traders might be moving on as a result. It sounds stressful. Liu, who graduated with a first class degree in quantum engineering and quantum chemistry from Cambridge University, is possibly inured to it.
Separately, Crispin Odey has also had a very stressful time and seems to have decide that enough is enough.
The Financial Times reports that Odey has decided not to pursue his £79m libel case against it. Odey’s lawyers reportedly said he had been “forced to accept” that he would probably not succeed on a public interest basis. However, had the case gone ahead, Odey thought that he would have been successful, “in demonstrating that he is not the violent predator he was presented as…”
The FT notes that it had 15 women willing to come to court and testify in favour of its series of articles reporting sexual misconduct allegations against Odey. Odey’s lawyers did not respond to a request to comment for this article.
Meanwhile…
Commodities trading houses lost billions of dollars in the early days of the Gulf War. “For most participants the situation was a surprise. Before the war started, there was a strong conviction in the market that prices would fall, and because of the war, they spiked.” (Financial Times)
JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America report Q1 results this week and are expected to unveil the highest combined quarterly revenues from their trading businesses for at least 12 years. (Financial Times)
Private capital firm Partners Group will also be inhibiting investor withdrawals if things get too intense. “If we see redemptions in these amounts above the gates, we will gate.” (Bloomberg)
Private equity investments are now typically held for seven years, he pointed out, double the previous norm. Assets held for more than six years are considered potentially stranded, meaning they’re at risk of write downs due to declining performance or a lack of new funds. (Bloomberg)
Bank CEOs are rushing to profess their love of the UAE. “Our support is unwavering…Our clients’ ambitions across the region haven’t changed,” says David Solomon at Goldman Sachs. Goldman Sachs is expanding its partnership with the Qatar Investment Authority, which may commit $25bn to its asset management arm. (Bloomberg)
It’s not easy living in the UAE and being woken up bombs every night. “The previous night was a rough one: alert, projectile, boom, alert, projectile, boom and so on. Morning life is normal again, as if nothing happened.” (Financial Times)
Anthropic’s Mythos model has been released to a few organisations. This includes banks like JPMorgan, Goldman Sachs and Citi. There have been suggestions that Mythos might be used to hack banks’ own sites. (Bloomberg)
What does AI do to junior hedge fund jobs? At smaller funds, roles might disappear: “One or two people on an investment team will be able to cover more stocks with more rigor with these tools….” At larger funds: “I think what you will see with junior analysts is that the junior analyst resource will be shifted more towards a primary research role.” (YouTube)
The exciting new reality for managers at EY: “They’re increasingly responsible for cultivating a psychologically safe environment where people can experiment, fail forward and learn from AI; coaching, developing others; and leading teams comprised of both humans and agents.” (Business Insider)
How to handle job cuts in banks. “Survivors of enough cycles know the drill. They don’t broadcast. They observe, document, and quietly assess their own position. The clearest reading on the barometer belongs to those who treat every flutter of the flag as another layer added to their wealth of experience and knowledge, the steady accrual of sharper instincts, refined protocols, and unshakeable resilience.” (Substack)
The job market is bleak, unless you are willing to train AI models. Patrick Ciriello designs software for banks but he lost his job in 2023. He now works 40 hours a week earning $20 an hour. (Guardian)
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