Morning Coffee: Market thugs attack hedge fund jobs while Goldman Sachs phones explode. Weird omission from the Goldman partner list

Yesterday was a day for metaphor. Taking a cold bath didn't quite describe it. Hedge fund coach Denise Shull told Bloomberg it was more like "being attacked in a parking lot by three thugs.” - “Your instinct is to fight back, and in some ways you have to — just long enough to find an opening to run.” John Flood, head of Americas execution services at Goldman Sachs, said phones had been "exploding." 

This wasn't literally so. Clients were calling with requests for "colour", said Flood. Goldman wasn't giving it but the more prosaic version of events was that hedge fund pods were blowing up amidst a sell-off of stocks related to the AI and data centre boom. Hedge fund bets have become highly leveraged. Last month the FT reported that when derivative exposures are taken into account, the biggest hedge funds are 15-20 times levered. Yesterday, that started to show as crowded and highly correlated bets unwound. 

After a brutal October in which many funds (Citadel excepted) lost money, we may be on track for an even more thuggish November. Funds are dumping staff. Walleye cut a large portion of its long short equities team. Engineers Gate cut most of its 'stock synthesis team' which worked on a combination of discretionary and systematic trades. Brevan Howard cut some more credit traders. There are unconfirmed suggestions of further cuts at other big funds. Almost certainly, more portfolio managers will be out. 

The meltdown comes at an unfortunate time for market pundits like Scott Rubner at Citadel Securities, who declared on Wednesday that the buyers were "coming back" and there was "considerable capacity for investors to rebuild risk," or David Solomon, CEO of Goldman Sachs, who said on Tuesday that there was "very robust" demand for AI deals, even if some bets might fail. 

Yesterday is leading some to question whether the much-anticipated Anthropic IPO will be shunted into the future, which would be bad news for all the Goldman Sachs bankers hoping to make big money in fees. 

There are significant risks ahead. Bruno Schneller, managing partner at a family office in Zurich, expressed them to Bloomberg: "As losses mount, risk managers may force funds to cut exposure, potentially triggering another wave of selling regardless of fundamentals.” No metaphors needed there. 

Separately, the Goldman Sachs partner list is out and it is big and strange. 

There are 109 people on the list, which is more than the 95 people made partners by Goldman in 2024 and the biggest class since 2010. The Financial Times notes that the new partners include 13 engineers. New APAC partners have more than doubled from eight to 20. New Paris partners have shrivelled from five to three. 

If you're a Goldman Sachs MD and you didn't make partner in the huge promotion class, you might be sad. Also sad might be female and ethnic minority MDs who are no longer a source of boasting in partner promotions. The New York Post notes that Goldman buried its DEI metrics, which is weird given that the world has been flooded with memes about their return.

Meanwhile...

Ex-JPMorgan chief market strategist, Marko Kolanovic: "With the end of Trump era, comes the end of AI/data center grift. Which was a scheme to create wealth for few, and illusion of prosperity for many (via stock market). And to give cover to otherwise reckless policies of wars, inflation, pollution and corruption." (X) 

"There was massive derisking into midterms and traders were surprised by yesterday’s move and got sucked back in. HFs selling back pockets of the market (hyperscalers) that they bought yesterday. We are not seeing buyers step in to defend anything just yet." (X) 

ING is dumping $500m of data centre loans. (Bloomberg) 

Hedge fund VARA, which was big on AI, fell 33% in October. (Bloomberg) 

Paul Yablon is returning cash to investors from hedge fund Room30. (Bloomberg) 

Samlyn Capital is dismissing analysts and refocusing on financial stocks. (Bloomberg) 

Hedge fund managers and other major investors collectively spent more than $330m on the US midterm elections. They mostly wanted low taxes, scant regulation and support for Israel. (FT)

New Goldman Sachs partners are selected through an intensive “cross-ruffing” process that this year involved more than a thousand interviews with candidates’ senior colleagues. (FT) 

UBS has shed more than 5,500 jobs since January and cut its spending on outside consultants by more than $800m. (FT) 

Millennium hired Citi banker Pranav Haridasan to lead its operations in India. (Bloomberg) 

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