Morning Coffee: Hedge fund managers who've lost $50m are the hottest hires. Pikachu analysts chase 3000% gains

There is an apocryphal story about a junior hedge fund trader who makes a big loss, and shamefacedly confesses to it, expecting the worst.  But to their surprise, their boss replies, “why would I fire you? I’ve just spent five million dollars on your education!”  In actual fact, what would generally happen at most pod shops is considerably less heartwarming; the junior trader would have their capital reduced and be fired automatically by the risk management department, a lot earlier and without the chance to plead for mercy.

But what if it’s the boss that made the trading loss, and the amount was ten times bigger?  Well, that might be a slightly different story.

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Of course, the key difference is that in order to be in any position to lose an eight-figure sum, you would have to have been given nine-figure portfolio to manage.  And in order to get into that position, you have to build up an extended track record of being able to generate returns and manage risks.  So even legendarily ruthless risk managers like Citadel and Millennium will sometimes stretch a point – if they are reasonably convinced that the loss was a one-off, they will usually give a second chance. 

However, as Dave Brodsky seems to have reasoned when moving from Citadel to Balyasny, a second chance is not always the most appealing offer.  Usually, the managers at a multistrategy fund are subject to “high-water mark” provisions on their bonuses; a second chance is effectively an opportunity to work for next to nothing until you’ve made your losses back.  In a very competitive hiring market, that’s less attractive than to move to a rival firm, where you can start making a profit and getting paid for it right away.

And the big 2025 loss-makers like Brodsky, Warren Cheong (Millennium to Schonfeld), Paul Netter (Millennium to Point72) and Rob Banham (Point72 to Citadel) haven’t just been attracting attention because they’re among the only big names who are interested in moving jobs in this market.  Some funds actively seek them out because they believe, in the words of recruiter Jason Kennedy, that “even a wounded lion is still a lion”, and that once they’ve got over whatever caused the loss, they will be worth a lot more money.

In other words, the “expensive education” myth is still quite widely believed.  The results have been somewhat mixed so far – Rob Banham has already left Citadel after making further losses there.  Because sometimes a big loss isn’t just a mistake or a blemish on an otherwise good track record.  Sometimes it’s a sign that somebody’s actually lost their edge, or that the market has changed to no longer suit their style.  But as long as there are huge amounts of money flowing into the multistrategy funds, and as long as portfolio managers with experience are in such short supply, it seems that career-ending losses don’t necessarily end your career.

Elsewhere, some traders are having a good year this year, as the “right kind of volatility” has been kind to them.  Anyone who happened to be long Oracle, for example, or Deutsche Bank’s distressed desk or Hamza Lemssouguer.  But there’s one asset class that has left all of conventional finance in the shade, and it’s not even crypto.

It’s Pokemon cards.  Yes, the things kids used to play with in the 90s.  But some of those kids have grown up by now, and have adult incomes to spend on completing their collection.  And like any collectible (stamps, wine, art, Beanie Babies), their price can sometimes get into bubbles which defy all rational thought.  Since 2004, the official Pokemon Index (yes, there is one), compiled by Card Ladder, the trading card analytics firm (yes, there is one), has outperformed the SP500 and even Magnificent Seven stocks like Meta.  The “Pikachu Illustrator” card apparently changed hands for $5.3million.  Others are worth pennies, though, so it pays to be able to spot forgeries or minor scuff marks.

It's hard to believe that this will end up with every investor staying rich, in all honesty. But as investment bubbles go, this does have the advantage that unlike Bitcoin, anyone in your office who is making massive returns from Pikachu, Charizard and the gang is likely to have the sense to shut up about it.

Meanwhile …

Mediobanca, the local heroes of Italian investment banking, has fallen to a successful bid by Monte Paschi di Siena.  It’s quite likely that the new owners will have to start by calming ruffled feathers and perhaps paying out some sizeable retention bonuses to big fee-earners, if they want the franchise to continue to be worth what they paid for it. (Bloomberg)

Masahiro Kihara, the CEO of Mizuho, has confirmed that the acquisition of Greenhill doesn’t mark the limit of his ambition by a long way.  With a strong balance sheet, he’s looking for further deals in Europe and the Middle East, with the aim of becoming a top ten global investment bank. (FT)

Given the tendency of former HSBC bankers to launch headcount reduction programs in their new jobs, staff at TD Bank might be a bit wary of their new COO, Taylan Turan. (Bloomberg)

Keith Welch is the latest banker to leave HSBC in London, moving to Standard Chartered to become its head of M&A for Europe. (Financial News)

Meta has a problem that any banker could have warned them would happen; after bringing in a lot of external stars to work in their prestigious AI franchise, they now have to deal with a lot of discontent and jealousy from their existing staff, contributing to an atmosphere that makes it difficult to keep the new hires. (WSJ)

An employment tribunal has confirmed that, in the UK at least, it is legal to refuse to hire people who don’t support the same football team as those already working in the office, if this is necessary to preserve workplace harmony. (Guardian)

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