The fall of a trading titan

Hello, I’m Emma Dunkley on the Asset Management team and I’m filling in for Harriet today.

One scoop to start: The Financial Times reveals how advisers had warned former Aberdeen chief executive Stephen Bird against rebranding as Abrdn and even requested that the UK asset manager exclude their consultancy name from marketing material.

In today’s newsletter:

• The downfall of trading titan Simon Sadler

• Market turmoil hits hedge funds

• Gold price reaches a record high

The downfall of trading titan Simon Sadler

Simon Sadler might have had humble beginnings growing up in Blackpool, but his career led him to become one of the most powerful players in a lucrative niche of global finance.

Segantii Capital Management, the hedge fund Sadler set up in Hong Kong, came to oversee billions of dollars on behalf of investors and Sadler made millions in the process.

But as Kaye Wiggins writes in this gripping tale for the FT’s Weekend magazine, Sadler has been accused of insider trading, in a Hong Kong criminal case that has struck at the heart of the “block trading” model. He has pleaded not guilty.  

Segantii speculated over when block trades — a large private share sale in a company — would happen, according to a banker who dealt with the hedge fund. In its first 15 years, Segantii had just one lossmaking year.

In 2021, a little-known family office in the US named Archegos Capital Management ran into trouble. It had built a large exposure to US and Chinese stocks, using leverage, and its bets were imploding. As banks started selling their underlying stock, Segantii was there to buy.

Later that year, in an unrelated move, US authorities stopped a former Segantii trader, Robert Gagliardi, at Los Angeles International airport, with a search warrant for his phone. His trading while at Segantii formed part of an investigation into Morgan Stanley’s block trading business.

Segantii’s fortunes started to turn and the hedge fund came under scrutiny. Bank of America’s market supervision team in the US issued a directive to cut off Segantii, because of concerns about block trading, in early 2021.

But in January 2024 the US case was settled and authorities did not name Segantii or Gagliardi, or accuse them of wrongdoing.

A few months later, Hong Kong authorities handed Sadler a criminal summons accusing him of insider dealing, in an unrelated case. 

The hedge fund has since shut operations and returned money to investors. Sadler, having made a not-guilty plea, faces trial in May next year. As Wiggins writes, this is just the end of the beginning.

Market volatility hits hedge funds

Donald Trump’s global trade war has triggered a bout of market volatility that is proving to be problematic for some hedge funds as they quickly reposition to stem their losses.

The US president’s tariffs have triggered a sharp stock market sell-off in recent weeks, which has hit the hedge fund sector particularly hard, Costas Mourselas and George Steer report.

Markets have been rattled by Trump’s on-off approach to tariffs on US trade partners, while a crackdown on immigration and cuts in the public sector have led to fears that inflation may surge and GDP growth could slow.

Hedge funds have responded by aggressively slashing their leveraged bets in an attempt to limit losses, cutting the amount they borrow from banks to buy or bet against shares.

Izzy Englander’s Millennium, which manages close to $75bn in assets, lost 1.4 per cent in under a week in early March, according to a person who had seen the numbers, while Ken Griffin’s hedge fund Citadel, which runs $66bn in assets, was down 0.3 per cent this year to the end of February.

A few people working at multi-manager hedge funds, which use a range of traders, lots of leverage and tight risk management, said the reduction in positions was the largest they had witnessed since late 2018 during another market sell-off.

But some investment firms are making hay. Billionaire Michael Platt’s firm BlueCrest Capital Management has gained almost 15 per cent so far this year after making bets on currency and bond markets.

Chart of the week

Gold hit a record high on Friday, breaching $3,000 per troy ounce for the first time in a move that the World Gold Council described as a “significant milestone.”

Investors have piled into the traditional ‘safe-haven’ asset as Wall Street stocks continue to tumble, stoked by concerns that Donald Trump’s aggressive trade agenda could hit US economic growth.

But since December, fears have grown that the US President could slap tariffs on gold imports. More than $61bn of bullion poured into the US as traders moved to avoid the potential levies, sparking a shortage in London, the world’s biggest gold trading hub, writes Leslie Hook.

The hoard of gold in New York has now surpassed even its previous Covid-era record.

The first signs of the surge emerged in early December, when industry figures gathered at a dinner hosted by the London Bullion Market Association and discussed the growing demand coming out of the US.

As traders raced to move gold from London to New York, the queue to withdraw gold from the Bank of England soon stretched to more than four weeks, causing a liquidity crisis in the London bullion market.

The BoE’s deputy governor Dave Ramsden was even held up by a lorry in the bullion yard while coming into the central bank’s building on one occasion.

“Gold is a physical asset, so there are real logistical constraints and security constraints,” he added.

Five unmissable stories this week

Bond fund Pimco has already recorded a 17 per cent paper profit on its portion of a £3bn emergency loan that it and other lenders are set to provide to ailing utility Thames Water.

Aviva Investors has ditched a landmark plan to dump carbon-intensive companies that failed to align their business with the Paris climate agreement in the latest sign of green backtracking from a big asset manager.

Stephen Schwarzman, chief executive of Blackstone and a prominent Donald Trump donor, believes the US president’s tariffs would ultimately lead to a significant increase in manufacturing activity in the US.

What lies behind the dramatic shift in markets? The sudden change in investors’ growth expectations for the three largest economies is upending many consensus trades, writes Mohamed El-Erian, adviser to Allianz.

The UK’s pensions minister Torsten Bell is pushing retirement funds to invest more in private markets as part of wider plans to improve performance and consolidate £1.3tn of UK pension assets.

And finally

The Whitworth gallery in Manchester is exhibiting women artists and collectives whose ideas spurred the women’s liberation movement. Women in Revolt! spans art and activism from 1970 to 1990 and features six key themes, from maternal and domestic experiences to punk and independent music.

March 7 — June 1, https://www.whitworth.manchester.ac.uk/