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A Summary of

Money Stuff: Hedge Funds Want to Stay Popular

by
Matt Levine
Money Stuff
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The Hedge Fund Business and Brevan Howard's Podcast

  • Earlier this year, Brevan Howard shut down its flagship fund to investors due to an unprecedented influx of demand. In 2019, it did the opposite due to customer exodus.
  • Brevan Howard is avoiding the boom and bust cycle by creating a podcast, where they explain the reasoning behind their investments.
    • They do this to improve investor confidence during market downturns.
  • A better method to reduce volatility is to sign multi-year lockups so clients can't simply take their money out when the fund takes a loss.

Person Securities Fraud

  • Pearson plc agreed to pay $1 million to settle charges that it misled investors about a 2018 cyberattack involving the theft of millions of student records.
  • The SEC determined Pearson's actions were securities fraud because, in 2019, Pearson stated a cyber attack as "hypothetical risk" when, in fact, it already happened.
  • Pearson could have avoided this fine if it simply worded its risk section to imply that the attack has already happened, although even that could be too hypothetical for the SEC.

Stablecoins and USDC

  • USDC is shifting all reserves into cash and short-term US Treasuries, forgoing riskier investments.
    • Because Stablecoin operators like to invest their reserves in securities, Stablecoins may never be worth exactly $1.
  • A Stablecoin issuer that held 100% of its assets at the Fed would be the purest form of Stablecoin. This approach is unrealistic right now because:
  • The Stablecoin issuer will have to get a banking license.
  • The Fed doesn't like "narrow banking," where a bank places all of its deposits on reserve at the Fed, so it would be hard for Stablecoin issuers to open a Fed account.

Broadridge

  • Broadridge allows brokers to distribute investor communications and charge fees back to the company.
  • It charges an absurdly high 25 cents per email, which vastly exceeds the cost of 5 cents to send the email.
  • Financial industry executives should be paying more attention to their databases, which could be costing much more than they expected.

Junior Bankers Are Getting Paid More

  • Salaries for Junior Bankers have shot up to surpass $100k.
  • The high entry-level salary reveals that the attractiveness of banking has decreased relative to other careers (e.g., tech and fintech).

Benefits

  • Companies don't advertise their benefits because they don't want to hire employees simply seeking those benefits.
  • E.g., Goldman Sachs didn't follow the trend of increasing salaries because they don't want to attract employees who are simply in it for the money.

The Poly Hacker

  • Poly Network is looking to attain the final key from the hacker that stole $600 million worth of cryptocurrency. The key has access to $240 million of funds yet to be returned.
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