There is a lot of press around discussing the struggles currency managers are having in making money in markets that ostensibly should be fertile ground. We have some real moves, event risk, interest rate divergence and a changing market structure – all of which would suggest there is an opportunity for everyone, but it's not happening. One of the reasons for this is that different narratives are driving markets at different times - and that makes it hard for a single strategy to succeed.
We often think 'big is better', but some hedge funds over the years have undergone the type of experience to make them question that adage. The scale of their success ultimately put too much pressure on the business and they had to scale back, or bifurcate their funds into internal and external investment pools. There is another advantage of not being institutionalised, as well, because thanks to the changing market structure, style drift may not be as taboo as it once was.
There’s something for everyone in this week’s In the FICC of It podcast as Colin Lambert and Galen Stops traverse the US legal system, trading, crypto and China.
Listen in as Lambert explains why he is mystified at the prosecution’s flip-flop in the Mark Johnson case and angry at the FX industry’s previous lack of effort to explain how markets work to the US legal authorities; and Stops takes a look at a new report n his favourite industry – CTAs. Having had the data explained to him, Lambert also thinks he knows why some CTA sectors are doing well and some aren’t, so that’s another of his “theories” then…
Our podcasters then move onto debate whether crypto markets will evolve to an OTC model and whether this would be a good thing for attracting institutional money to what is still a relatively nascent market.
Stops closes out by reporting from an analysts’ briefing this week that highlighted a change in approach on the part of China to its programme of liberalisation of the yuan.