Morning Coffee: Star Deutsche Bank trader earns much-needed win for CEO. Hedge funds nothing but a ‘fee racket’

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The way things have gone for Deutsche Bank recently, one would almost have to assume that the German lender was one of the several banks that was on the wrong side of bets on Turkish bonds and currency. However, due to the keen foresight of one trading desk, the exact opposite happened.

A fixed income trading group led by Deutsche lifer Aditya Singhal generated more than $35 million in profits in the two weeks following the initial plunge of the Turkish lira, according to Bloomberg. Based in London, Singhal runs a team of credit, rates and FX traders who have reportedly booked a massive $135 million in profits so far this year. Singhal’s recent success is no fluke. When announcing his new role in 2016, Deutsche Bank called Singhal “one of the most profitable traders” within its European credit business.

The news couldn’t come at a better time for new CEO Christian Sewing, who raised many an eyebrow in July when he suggested he would redeploy capital saved from massive job cuts to the bank’s fixed income trading unit, which had just posted its worst second quarter performance since the financial crisis – down 17% year-over-year. Many rival banks saw double-digit gains during Q2. Sewing may owe Singhal a hug – or at least a huge year-end bonus.

Meanwhile, a senior trader a Barclays reportedly lost $17 million in just three days betting the other way on Turkish corporate bonds. Funds run by JPMorgan Asset Management, Barings and Edmond de Rothschild are also said to have been stung by exposure to Turkey.

Elsewhere, the chief executive of a $13 billion asset manager went scorched earth on hedge funds, calling them a “management fee racket.” Magda Wierzycka, CEO of South African money manager Sygnia, said she has fired every hedge fund manager at the firm and has closed all its hedge fund products. Wierzycka noted that current strategies aren’t outpacing the market, nor are they even hedging against risk.

“This should be the ideal time for hedge funds to show they can finally deliver on the promise of preserving capital,” she said. “The sad truth seems to be that they cannot.” Ouch.

Meanwhile:

Goldman Sachs acknowledged Wednesday that it is in fact working with Elon Musk on potentially taking Telsa private. Goldman has removed its research analysts’ rating on the company. Meanwhile, the SEC has subpoenaed Tesla’s directors to see if Musk actually had the financial commitments necessary to take the company private when he tweeted so last week, sending the stock skyrocketing. (Bloomberg)

The narrative that the Trump administration’s proposed changes to the Volcker Rule has banks and traders jumping for joy may be a false. Lawyers representing more than 10 banks including J.P. Morgan and Bank of America met with the Federal Reserve to complain about Volcker 2.0, noting it could hamper trading in certain asset classes and complicate compliance issues. (WSJ)

Morgan Stanley’s new compensation plan for brokers punishes those who count little fish as customers. For clients with less than $250k in assets, advisors will see a reduced payout of 25% if they can’t move them into low-touch managed accounts. (Investment News)

Thirteen of the 25 highest-paying jobs are in the tech sector. (VentureBeat)

Former employees at a $17 billion bond fund based in California called Post Advisory have complained about the firm’s culture and CIO, who has reportedly punch holes in walls, cursed out colleagues and even allegedly offered to fistfight a co-worker in a conference room. (Bloomberg)

James Nessel, Deutsche Bank's co-head of U.S. high yield trading, has reportedly left the bank. (Business Insider)

U.S. banks have increased security after the FBI warned them of the potential of a huge cyberthreat known as ATM “jackpotting.” (Bloomberg)

The Royal Bank of Scotland has ranked last among all U.K. banks by small businesses. (Financial News)

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