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One hedge fund strategy is getting killed; another is killing it

On the whole, the hedge fund industry is in great shape. Assets under management are near a record high, the markets have been resilient and the pay is fantastic. But not everyone is winning, despite a terrific 18 months in equities. Macro-driven funds are quietly getting killed.

These funds, which trade based on broad macroeconomic trends, are suffering from a number of market abnormalities, but one in particular. The lack of market volatility for these enormous funds has severely hampered their ability to generate profits, according to the Wall Street Journal.

Some of the biggest names in the industry are stumbling through 2014. Moore Capital Management, Brevan Howard Asset Management, Caxton Associates, Discovery Capital Management Fortress Investment Group and Balestra Capital, among others, have all reportedly posted losses. The S&P, meanwhile, is up nearly 6% on the year.

The lack of trading volume has tied the hands of many firms that typically make massive wagers. In the current slow market, they’re simply too big to do their usual work. One fund manager told investors that, with all the time he has on his hands, he spends most of his days at the office daydreaming about winning “Dancing with the Stars,” according to the Journal.

Unfortunately, the strategy is as popular as it is ineffective, at least at the moment. Nearly 1,900 funds focus on macro investing, up from just over 1,200 in 2008.

If you want to work in the hedge fund industry, macro funds may not be your best bet. Activist firms, on the other hand, are hotter than they’ve ever been. A whopping 70% of institutional investors said they’re prepared to invest in activist funds this year, according to one survey.

Activists funds have averaged an annual return of nearly 13% over the last five years, but many are doing much better than that. Last year, Dan Loeb and Carl Icahn’s main funds gained 25% and 31%, respectively.

Jobs should be available. The number of new activist hedge funds more than doubled last year.

Can I Go Home Now? (eFinancialCareers)

As an intern, when is it appropriate to call it a night? Is it as simple as going home when the day’s work is done? The short answer is no.

Mortgage Trading Reorg (Bloomberg)

Morgan Stanley is restructuring its U.S. residential-mortgage business to improve collaboration. Jared Mesznik will now head all trading groups focused on debt.

A Lot of Dough (NY Post)

Regulators are looking to get paid. UBS may be required to pay $8 billion in fines for allegedly rigging currency rates while Citigroup may need to fork over as much as $10 billon for its mortgage-backed securities snafu.

Rough Hangover (Business Insider)

A young trader had a big night out with colleagues and was too hungover to make it to work the next day. He called in sick with a stomach big. His colleagues then delivered everything you can imagine to his apartment: four pizzas (from four different restaurants), roses and even a dinning room centerpiece. The bills were due on delivery, of course.

Another Big-Name Hire at UBS (Dealbook)

UBS has poached Jerry Marcus from Bank of America. He’s set to become the new chairman for its Americas investment bank. UBS has been beefing up its U.S. investment bank in recent months.

Gold Watch (NY Times)

Longtime Bain Capital managing partner Mark Nunnelly has retired.

Healthcare Bankers Needed (Financial News)

RBC, Bank of America and several other firms are desperate for healthcare bankers in London. The European healthcare market is booming.

Buzz Around the Office

Where Do I Sign? (WSJ)

A London fast food company called Chilango is offering a four-year corporate bond with an 8% yield. That’s not all though. If you invest £10,000 you get a free burrito every week for the life of the bond. Investing in your future and your waistline. A can’t miss.

Quote of the Day: “There should be a children’s song: ‘If you’re happy and you know it, keep it to yourself and let your dad sleep.’” – Jim Gaffigan

AUTHORBeecher Tuttle US Editor

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