Almost a year has gone by since the high profile demise of what was the largest FX hedge fund in the world at its peak. FX Concepts, founded over 30 years ago by John R Taylor, lost its final industrial mandate toward the end of 2013, with no interest from other industry leaders jumping in to take its place… until now.
Today it has been announced that Anil Prasad, who previously held the position of Global Head of FX at Citigroup, is preparing to establish his own hedge fund in the first quarter of 2015.
According to industry sources that have remained anonymous, Mr. Prasad’s initiative has been inspired by the Volcker Rule having been invoked, which restricts banks from conducting proprietary trading – a term referring to financial institutions trading with their own funds. Currently the Volcker Rule exempts the FX asset class and institutional trading desks, but North American banks are no longer able to trade on their own accounts. Subsequently, proprietary traders who previously held senior positions at large North American banks have begun to take the initiative to go it alone, one example of which is Mr. Prasad who left Citi earlier this year.
He will be joined by Farhang Mehregani, the former chief investment officer of Sciens Alternative Investments as one of the partners, two sources explained to Reuters.
The hedge fund will have operations in New York and London and follow global macro trading strategy. Such funds focus on major economic trends and bet anywhere they see value, including stocks, bonds, currencies, commodities and derivatives markets, with start up capital unknown at this stage.
Currently, Mssrs Prasad and Mehregani have not obtained regulatory licenses, however they would only require regulatory oversight if the hedge fund intends to trade on behalf of customers, with customer investments. Trading on one’s own resources bears no risk to customers and therefore generally does not require regulation, as the hedge fund operators would be considered institutional traders if not taking on board clients.
If, however, the fund does take on commercial clients, it could replace John R. Taylor’s ill-fated FX Concepts in gaining the large, public sector pension schemes that withdrew from FX Concepts and have not been able to find a suitable alternative.
Industry tracker Eurekahedge estimates that macro hedge funds manage about $170 billion globally, a small but rapidly growing hedge fund strategy in the nearly $3 trillion industry.
The sources declined to be named as the launch plan was not yet public. Prasad, who was appointed global head of foreign exchange & local markets in February 2007, could not be reached for a comment.
Mr. Mehregani, also a former Citigroup executive until 2011, left Sciens at the end of June, records with the UK regulator the Financial Conduct Authority show.
Dozens of other traders have left banks to start their own hedge fund or join existing funds since the financial crisis began in 2008, including Vincent Craignou, former global head of foreign exchange and metal derivatives at HSBC, who joined Mr. Brevan Howard Asset Management in December last year.
Macro hedge fund start-ups this year includes Guard Capital in Hong Kong headed by Leland Lim, former co-head of macro trading for Asia Pacific ex-Japan at Goldman Sachs, and Allan Bedwick, the former head of macro trading in Asia for Noble Group.