Showing posts with label JP Morgan. Show all posts
Showing posts with label JP Morgan. Show all posts

Monday, 1 April 2013

Asteri Capital and the London Whale: A secret history of Glencore's hedge fund


WELCOME TO OUR TREASURY: HERE BE DRAGONS

The global commodity trading giant Glencore once had an internal hedge fund that made proprietary bets on global markets. It was called Asteri Capital. What do you think it bet on? Most people would probably make an educated guess and say commodities, but they'd be wrong. It bet on global credit markets, bonds, structured credit products and credit derivatives that have nothing to do with commodities.

Weirdness level 1: Why did Glencore have a credit hedge fund?
Ok, that's pretty weird. Why would a commodity company like Glencore have a bond-trading hedge fund? Asteri Capital actually started life as something called Glencore Finance AG, and was, for all intents and purposes, just a proprietary trading desk within Glencore, based out of its 50 Berkeley Street office in London. It furthermore appears that it was originally just part of Glencore's treasury, the part of the firm that deals with things like borrowing money for the day-to-day operations of Glencore and managing its cash flow. Here it is from the horses mouth (I've added in comments in square brackets):
"Glencore International AG [the Glencore parent company] funded the investment activities of Glencore Finance AG [The prop trading desk] on a trade-by-basis [Translation: Whenever it felt like it]... Proceeds from the sale of investments (including capital gains) were returned to Glencore's treasury [Translation: Glencore's treasury was the hedge fund]. Unlike an investment fund, realized profits did not serve to increase Glencore Finance AG's funds under management [Translation: Profits went to Glencore's treasury instead]... Glencore Finance AG was historically engaged in certain investment strategies which Asteri Capital Ltd (the Fund) will not pursue in the future [Translation: Asteri is a more limited successor operation to whatever we were doing before]."
This Glencore proprietary trading operation was started by a guy called Evan Kalimtgis, who left Dresdner bank in April 2005 - along with several other Dresdner traders like Athanasios Stavrou, Phil Burford and Matt Johnson - to take up residence at Glencore Finance AG. Initially it was just a group of guys who got thrown money whenever the Glencore treasury felt they had a worthwhile trade to put on, and any cash they made got returned to the treasury. After a while though, they gained some nominal independence, and in December 2006 they started accepting outside investment, becoming Asteri Capital Ltd, an FSA authorised investment firm.

In his LinkedIn profile, Athanasios Stavrou describes himself as: "instrumental in setting up Asteri Capital (a multi-strategy credit hedge fund with $450mil in assets under management) and creating the initial track record that led to raising external funds in 2006. Managed the long/short structured credit strategy ($100mil) and co-managed the High Yield Fundamental Credit Portfolio Strategy ($125mil). Both involved directional, relative value, macro and fundamental credit investments through bonds, loans, credit indices and credit derivative products." 

Other LinkedIn info come from Matt Johnson (now at hedge fund Makuria) who describes Asteri as a "multi-strategy credit hedge fund of Glencore" doing "correlation, vanilla and bespoke portfolios... relative value credit trading... convertibles strategy, credit volatility... and prime lending".

I SEEK LONDON!
Weirdness level 2: Whale ahoy!
So, Glencore's treasury was harbouring a kind-of-secret credit hedge fund. Does this sound familiar? If you've been following the J.P. Morgan London Whale saga it probably does: J.P. Morgan basically set up a hedge fund in its Chief Investment Office, a part of the firm that is supposed to do risk management alongside the treasury, not proprietary trading. A trader called Bruno Iskil was placing massive bets on credit derivatives, which ended up losing J.P. Morgan some $6 billion.

Which brings us to the second weird part of the story. In October 2008 the Asteri Capital team breaks up. Lehman had just gone bust and it was a pretty bad time for global credit markets. Maybe Glencore was cashing out (or cutting their losses), but the team splits and drifts off to various hedge funds and banks. The leader, Evan Kalimpgis, ends up at none other than J.P. Morgan, where he is hired as co-head of risk management in the Chief Investment Office, alongside Achilles Macris, who he used to work with at Dresdner. They find themselves presiding over a guy called Bruno Iskil, aka 'the London Whale'. So, yes, the guy that was responsible for running Glencore's internal treasury hedge fund was the same guy that was later Bruno Iskil's boss at JP Morgan. The moral of the story thus, is that Evan specialises in working in treasuries that ain't really treasuries.

Weirdness level 3: Some political skeletons in the closet
Let's add one final layer of weirdness for good measure. Back when Evan Kalimtgis was running Asteri, he worked alongside a guy called David P. Goldman, a credit strategist. Goldman also happened to have worked with Evan's father, Kostandinos Kalimtgis, on a late-70s book called Dope Inc, sponsored by a guy called Lyndon LaRouche, which argued that the financial elite in the City of London controlled the global drugs trade. Goldman says he was under the "gnostic cult of Lyndon LaRouche" before breaking away and going all neocon and Wall Street. It seems he and Evan's dad turned on Lyndon: Check out the July 15th 2008 comments by a guy called Roger Moore under this post here. Goldman was, until 2009, writing political commentary under the pseudonym 'Spengler', which he admits here.

Calling all investigators! 3 questions that need answering
Glencore, Lyndon LaRouche, global credit trading, London Whale, secret hedge funds? I mean, WTF? This may be a conspiracy theorist's dream, but I don't have the time to investigate. If anyone else has the inclination to go after this though, I'm interested in three questions:
  1. Why was Glencore hosting Asteri in the first place? Did the Glencore management know the guys originally? Were they doing them a favour? Was it part of Glencore's overall strategy, or just an ad hoc add-on to their commodity trading business?
  2. What was Evan Kalimpgis doing at J.P. Morgan after leaving Asteri Capital, and why did he leave before the London Whale scandal broke? Is there any connection between the activities in the two firms he was part of? Is their a crew of traders who hop through corporate treasuries doing proprietary trading instead of risk management?
  3. What is all this stuff about Lyndon LaRouche? How does Goldman go from writing about City of London conspiracy theories to analysing credit derivatives, and why does he end up hanging out with the son of his former writing buddy at a hedge fund in Glencore?
Maybe there are really boring answers to all these questions, or maybe it's a Hollywood film in the making, but please do send links, comments or suggestions if you find anything out.



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Sunday, 6 January 2013

Culture-Jamming with the Lords of Finance: Jamie & Bob

BEAR STEARNS (2008)
DIMON: "A PIECE OF ART CLOSE TO MY HEART"
I have many artists in my family - for example, my mother creates psychedelic textile art, and my uncle  Stidy is a political cartoonist - but I feel over the last few years that I've been giving too little attention to the dark arts of art. So, welcome to my first exhibition.

It all started when I was messing around with one of those demotivational poster generators. I was reflecting on the sad greatness of the now departed Bear Stearns, and Shakespeare came to mind with the speech of Mark Antony, when he says "Friends, Romans, Countrymen, lend me your ears, so that I can sell them to an investment bank that wants to securitise them". One thing led to another, and I created my first masterwork. I called it simply, Bear Stears, but it is now known amongst collectors as 'ear 'ear.

When I first put it out for auction on Ebay, the piece wasn't well understood, it's meaning opaque like a Cayman Islands SPV. But, there was one man whose heart it captured, and he offered me $10 a share for it. He was my first patron, JP Morgan CEO Jamie Dimon.



I do dedications
I was inspired by Jamie's bold leadership of JP Morgan, and also wanted to keep him sweet so that he'd buy more of my art, so, in honour of him, I made a special edition print called The Dirty Work. It was a simple portrait against the backdrop of his respected asset management division, showing his understated elegance. I pinged him an email with a JPG copy, but his personal assistant replied saying "Jamie says you've hurt his feelings and should go screw yourself". I'm still confused by this response, but I think he's a bit sensitive because his company is being sued for Bear Stearns 'Shit Breather' mortgage bonds.

A CONTROVERSIAL PIECE: THE DIRTY WORK (2011): £13 000


I do commissions
You learn to deal with the rejection in the art world though. As it happens, there was a silver lining, because Bob Diamond saw The Dirty Work at a distressed asset auction. He was impressed, and called me up on Skype, saying he was nostalgic for Barclays and that he wanted a piece reflecting on his tenure at the bank that he was thrown out of. I was sensitive to his wishes. I created a work called Libortarian Dreams, featuring dreamy blue imagery from his past. Bob, unlike Jamie, was very happy with it.

LIBORTARIAN DREAMS (2012)


MR DIAMOND: MY HAPPY PATRON!


I do deep social commentary
It's all too easy for an artist to become slaves to their patrons and to lose touch with the everyday person. This is why I do special edition print runs of more down-to-earth creatures, like Morland, the Merrill Lynch Bull. Morland has always felt objectified on Merrill's logo (they even incorrectly refer to him as 'Dollar') and wanted to use his position to draw attention to the plight of less fortunate cattle in the factory farming industry. He helped me design, and posed for, a touching piece called Bully Beef.


BULLY BEEF (£450)

Morland was kind enough to pose for me in another print too, featuring my brother reflecting on a nuclear explosion that I made on PaintShop. Both of these prints go for the meagre sums of £450, payable also in Bitcoin.

TALKING BULL: £450


So, what do you do? Become an artist
Pablo Picasso once said "What do you think an artist is? An imbecile who has only his eyes if he is a painter, or his ears if he is a musician?... On the contrary, he is at the same time a political being, constantly on the alert to the heart-rending, burning, or happy events in the world, molding himself in their likeness." He also said "there ought to be an absolute dictatorship of painters", so go out, ye dictators and be merry, paint Canary Wharf in bright canary yellow, Wall Street in emerald green and Hong Kong in neon lava orange. Send me your images, and I'll put them up.