Hedge funds are piling into the same bets ahead of the inauguration of President-elect Donald Trump.

There are "extreme market positions in all asset classes," according to Societe Generale. It said the "extreme positioning inevitably raises the question of whether investors have run ahead of themselves."

The popular trades include:

• "Net short positions on 10-year Treasury notes are at historical highs, implying that rising US bond yields remains among hedge funds' major convictions."
• "Hedge funds have (very) high expectations for the domestically oriented US small caps of the Russell 2000."
• "Historically long on copper and oil."

The logic behind these trades is obvious. The Trump administration is expected to increase fiscal spending and focus on employment, which in turn could lead to higher inflation and higher rates. And his pro-business policies and plan to cut taxes are expected to benefit US-oriented stocks.

"Never before have hedge funds been so bullish on the Russell," Societe Generale said. "This would suggest that hedge funds are fully convinced that Trump's economic policy, centered on protectionism and fiscal stimulus, will work out well for US small-cap companies."

Trump's policies are also expected to promote economic growth and construction, benefitting cyclical commodities such as oil and copper.

"The growth environment is clearly supportive, with an extension of the economic growth cycle and rising oil demand creating the right conditions to revive the OPEC cartel," Societe Generale said.

Let's look at the charts:

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Hedge funds are betting on higher yields.

They're bullish on US small caps.

They're long oil.

LONDON — A fund run by famed London investor Crispin Odey had one of its worst years ever in 2016, according to an investor letter seen by Business Insider.

Odey Asset Management's OEI Mac fund, which is managed by the hedge fund's founder Crispin Odey, declined in value by 49% in 2016, according to Odey's December letter to investors.

That marks the fund's worst performance since 1994, according to historical data included in the letter. Odey's fund lost 40.7% of its value in 1994 after the Federal Reserve unexpectedly raised interest rates.

Odey Asset Management did not immediately respond to Business Insider's request for comment.

The OEI Mac fund is Odey's main European fund and aims to "achieve long-term capital appreciation" through bets on stocks, currencies, and bonds.

Odey's fund delivered negative returns in every month from July to December in 2016, the letter shows, but also suffered big losses in February and March, including a 24.4% slump in the later month.

The performance marks the second difficult year in a row for Odey. Data in the letter shows the OEI Mac fund lost 21.3% of its value in 2015.

Odey Asset Management is one of London's best-known hedge funds and manages over $7 billion in client money. Its founder, Crispin Odey, is famed for his successful trading of the financial crisis, delivering 43.4% growth of the OEI Mac fund in 2008.

Odey was a prominent supporter of the campaign to leave the European Union in last year's referendum. He was one of the founders of the "Vote Leave" group, which became the official Brexit campaign, and is donated just over £500,000 to the cause.

A fund manager at Odey Asset Management reportedly made £110 million betting against the pound in the immediate aftermath of the Brexit vote but Odey himself has been bearish on the vote's economic effects, warning clients last year of likely recession in Britain and a collapse in stock values. This bleak outlook has led Odey to place large bets on another looming crash, as the Financial Times reports. So far, these have yet to pay off.

Odey attacks global productivity issues in December's letter to investors and blames economists and central bankers for fomenting problems. He writes: "What started out as a temporary last resort has become the only way to keep things going.

"By keeping asset prices high and encouraging them to go higher, by underwriting these prices, the rich have got richer without it helping the economy. So now the politics starts to get messy. The Haves against the Have Nots. "

He closes the letter saying: "This economic cycle is now 7 years old. It has become old, but like King Lear, not wise."

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NEW YORK (Reuters) - Investors are starting to sour on the idea of reimbursing hedge funds for multi-million dollar trader bonuses, lavish marketing dinners and trophy office space.

Powerful firms such as Citadel LLC and Millennium Management LLC charge clients for such costs through so-called "pass-through" fees, which can include everything from a new hire's deferred compensation to travel to high-end technology.

It all adds up: investors often end up paying more than double the industry's standard fees of 2 percent of assets and 20 percent of investment gains, which many already consider too high.

Investors have for years tolerated pass-through charges because of high net returns, but weak performance lately is testing their patience.

Clients of losing funds last year, including those managed by Blackstone Group LP's <BX.N> Senfina Advisors LLC, Folger Hill Asset Management LP and Balyasny Asset Management LP, likely still paid fees far higher than 2 percent of assets.

Clients of shops that made money, including Paloma Partners and Hutchin Hill Capital LP, were left with returns of less than 5 percent partly because of a draining combination of pass-through and performance fees.

(For a graphic on the hedge funds that passed through low returns, click: http://tmsnrt.rs/2iLRB3T)

Millennium, the $34 billion New York firm led by billionaire Israel Englander, charged clients its usual fees of 5 or 6 percent of assets and 20 percent of gains in 2016, according to a person familiar with the situation. The charges left investors in Millennium's flagship fund with a net return of just 3.3 percent.

Citadel, the $26 billion Chicago firm led by billionaire Kenneth Griffin, charged pass-through fees that added up to about 5.3 percent in 2015 and 6.3 percent in 2014, according to another person familiar with the situation. Charges for 2016 were not finalized, but the costs typically add up to between 5 and 10 percent of assets, separate from the 20 percent performance fee Citadel typically charges.

Citadel's flagship fund returned 5 percent in 2016, far below its 19.5 percent annual average since 1990, according to the source who, like others, spoke on the condition of anonymity because the information is private.

All firms mentioned declined to comment or did not respond to requests for comment.

In 2014, consulting firm Cambridge Associates studied fees charged by multi-manager funds, which deploy various investment strategies using small teams and often include pass-throughs. Their clients lose 33 percent of profits to fees, on average, Cambridge found.

The report by research consultant Tomas Kmetko noted such funds would need to generate gross returns of roughly 19 percent to deliver a 10 percent net profit to clients.

'STUNNING TO ME'

Defenders of pass-throughs said the fees were necessary to keep elite talent and provide traders with top technology. They said that firm executives were often among the largest investors in their funds and pay the same fees as clients.

But frustration is starting to show.

A 2016 survey by consulting firm EY found that 95 percent of investors prefer no pass-through expense. The report also said fewer investors support various types of pass-through fees than in the past.

"It's stunning to me to think you would pay more than 2 percent," said Marc Levine, chairman of the Illinois State Board of Investment, which has reduced its use of hedge funds. "That creates a huge hurdle to have the right alignment of interests."

Investors pulled $11.5 billion from multi-strategy funds in 2016 after three consecutive years of net additions, according to data tracker eVestment. Redemptions for firms that use pass-through fees were not available.

Even with pass-through fees, firms like Citadel, Millennium and Paloma have produced double-digit net returns over the long-term. The Cambridge study also found that multi-manager funds generally performed better and with lower volatility than a global stock index.

"High fees and expenses are hard to stomach, particularly in a low-return environment, but it's all about the net," said Michael Hennessy, co-founder of hedge fund investment firm Morgan Creek Capital Management.

INTELLECTUAL PROPERTY

Citadel has used pass-through fees for an unusual purpose: developing intellectual property.

The firm relied partly on client fees to build an internal administration business starting in 2007. But only Citadel's owners, including Griffin, benefited from the 2011 sale of the unit, Omnium LLC, to Northern Trust Corp for $100 million, plus $60 million or so in subsequent profit-sharing, two people familiar with the situation said.

Citadel noted in a 2016 U.S. Securities and Exchange Commission filing that some pass-through expenses are still used to develop intellectual property, the extent of which was unclear. Besides hedge funds, Citadel's other business lines include Citadel Securities LLC, the powerful market-maker, and Citadel Technology LLC, a small portfolio management software provider.

Some Citadel hedge fund investors and advisers to them told Reuters they were unhappy about the firm charging clients to build technology whose profits Citadel alone will enjoy. "It's really against the spirit of a partnership," said one.

A spokesman for Citadel declined to comment.

A person familiar with the situation noted that Citadel put tens of millions of dollars into the businesses and disclosed to clients that only Citadel would benefit from related revenues. The person also noted Citadel's high marks from an investor survey by industry publication Alpha for alignment of interests and independent oversight.

Gordon Barnes, global head of due diligence at Cambridge, said few hedge fund managers charge their investors for services provided by affiliates because of various problems it can cause.

"Even with the right legal disclosures, it rarely passes a basic fairness test," Barnes said, declining to comment on any individual firm. "These arrangements tend to favor the manager's interests."

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Billionaire hedge fund manager George Soros on Thursday reiterated his belief that President-elect Donald Trump is "an imposter and con man and a would-be dictator."

Soros, 86, said at the World Economic Forum in Davos, Switzerland, that he is convinced the president-elect will fail.

"He stands for that other form of government, which is the opposite of an open society," said Soros, who is a Holocaust survivor and Hungarian immigrant. "It's really better described as a dictatorship or a mafia state."

Soros said Trump "would be a dictator if he could get away with it," but that US institutions are strong enough to prevent that scenario. He also said the ideas that guide Trump are "inherently self-contradictory" and that those contradictions are "embodied by his advisers."

Uncertainty, he said, is "at a peak" right now.

"It's impossible to predict exactly how Trump is going to act because he hasn't actually thought it through," Soros said. "He didn't expect to win. ... He was engaged in building his brand."

Asked how the business community should deal with Trump going forward, Soros said, "I will keep as far away from it as I can."

On the topic of international relations and global trade, Soros said China would be "greatly helped" by Trump.

"I think Trump will do more to make China acceptable as a leading member of the international community than the Chinese could do by themselves," he said.

This isn't the first time Soros has spoken out against Trump. He described the president-elect in similar terms in December. He said Trump's proposed Cabinet "comprises incompetent extremists and retired generals" and that the US would "be unable to protect and promote democracy in the rest of the world."

The billionaire investor supported Hillary Clinton during her presidential campaign and donated millions to a pro-Clinton PAC. He also donated to Clinton's campaign in 2008.

Soros lost about $1 billion after Trump's political victory, according to The Wall Street Journal, having made bearish bets that later came back to bite him. Still, his fund gained 5% over 2016, according to The Journal.

SEE ALSO: GOLDMAN SACHS CEO: The markets were already great before Trump's win

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Billionaire hedge fund manager George Soros said Theresa May is unlikely to last long in power with a divided cabinet and slim parliamentary majority.

"It is unlikely that Prime Minister May is actually going to remain in power," Soros, 86, said at the World Economic Forum in Davos, Switzerland, in an interview with Bloomberg Television's Francine Lacqua.

"She already has a divided cabinet, a small majority in parliament, and I think she will not last," he said.

Soros also said that the UK is "in denial" about the negative economic effects of leaving the European Union.

Soros said living standards will drop at some point and people will change their minds about leaving the EU.

"At the moment the people in the UK are in denial," said Soros. "The current economic situation is not as bad as predicted and they live in hope."

"But as the currency depreciates, inflation will be the driving force that leads to the decline in living standards. It will take a while but it will happen. And then they'll realise that they're earning less than before because wages won't rise as costs of living. It's much harder to divorce than get married. The desire for rapprochement will grow."

Before Brexit, Soros predicted "the pound would fall by at least 15% and possibly more than 20%," on a vote to leave the EU, which has proved to be true.

Soros, whose hedge fund made £1 billion betting against the pound on "Black Wednesday" in 1992, struck a dark tone on the future the EU. "The European Union has become too complicated and people are alienated. And anti-EU parties and movements are gathering force and things look very bleak," he said.

"The European Union has become too complicated and people are alienated. And anti-EU parties and movements are gathering force and things look very bleak," he said.

Soros ended with concerns that tensions between China and the US over trade could lead to worsening global security. "If you start a trade war it can easily deteriorate in other conflicts, it's very dangerous," he said.

In the same interview, Soros attacked President-elect Donald Trump as "an imposter and con man and a would-be dictator."

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By Svea Herbst-Bayliss

BOSTON, Jan 20 (Reuters) - U.S. President Donald Trump's policies could lead to more violent stock market movements, something prominent hedge fund manager Lee Ainslie said could help his portfolio rebound after a lousy 2016.

Ainslie's $11 billion Maverick Capital missed out on a rally sparked by Trump's unexpected election in November and ended the year with double digit losses in its biggest funds, underperforming the broader stock market and most hedge funds.

But the manager, a protege of storied industry investor Julian Robertson, wrote to investors in a letter dated Jan. 17 and seen by Reuters on Friday, that he was confident his firm will make money this year. Stocks that ran up could fall back and bets against some retail stocks will pay off, he said.

"Maverick has a long and consistent history of generating strong returns after periods of loss," the letter said.

The Maverick Fund LDC lost 10.6 percent and the Maverick Levered fund fell 20.9 percent.

Rising prices and tight labor markets could threaten economic growth and Trump's uncertain foreign policy plans, trade and tax policies could translate into more stock market gyrations, Ainslie wrote.

"Did I mention that the President-elect has a habit of sending random and sometimes bizarre tweets in the early morning hours?" the letter said. "Such uncertainty on a vast range of critical issues will likely breed higher volatility in the equity markets."

Ainslie's call for more stock market volatility seems currently out of step with other observers and recent market behavior. The VIX, which measures volatility, has been running below its historical average in January. But markets can reverse fast.

"The market's perspective on expected volatility can change quickly and violently ... we believe we are well-positioned to endure a higher volatility environment," Ainslie wrote.

Maverick's largest positions included computer software company Adobe Systems Inc, social media company Facebook Inc, biopharmaceutical company Pfizer Inc and discount travel company Priceline Group Inc.

He did not identify the retailers he is betting against and cautioned that it was not a simple "assessment of the ecommerce vs. bricks and mortar Battle Royale.""We no longer believe the theme is "Short Retail". We are now in the early innings of what we believe is called "Omni-Channel Evolution" and stock selection has never been more important," he wrote.

Despite losses, Ainslie said investors stuck with the firm and added new money every month in 2016. (Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)

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Another Wall Street investor expects a strong year for stock pickers.

Leon Cooperman's Omega Advisors says active equity managers will be able to take advantage of increased volatility.

That's according to an investor letter from the equity-focused hedge fund dated January 19, a copy of which was viewed by Business Insider.

"Active management needs asset and individual security volatility," the letter said, which the firm expects to come.

Increased volatility should come for four reasons, according to the letter:

• "Very friendly Federal Reserve/global monetary policies have dampened fixed income volatility, in turn restraining equity market/individual stock volatility. The Federal Reserve has started to tighten policy and central banks in the Euro area and Japan are likely at their limit of friendliness. Global monetary policies have almost certainly reached the limit of their friendliness and should therefore no longer limit risk asset price volatility to the extent this was the case in the last several years."
• "Fiscal stimulus is almost certain in the U.S. in 2017 and this change in policy mix, from pure monetary/no fiscal to less monetary/more fiscal, should lift risk asset volatility."
• "An ever lower standard deviation of U.S. economic growth and inflation explain a portion of currently below-average risk asset volatility and this should reverse given the above average length of the U.S. economic expansion, a greater portion of our growth attributed to the more volatile capex sector, and an almost certain lift in wage and consumer inflation."
• With Trump's presidency, the risk of a boom/bust economic outlook has increased. That's because Trump's administration has pitched fiscal stimulus even though the U.S. economy is close to full employment. "This is highly unusual – the unemployment rate is typically much higher than current when fiscal stimulus is introduced," the letter said.

"2016 was a 'tale of two cities,' a first half which brought challenges to active stock pickers and tailwinds to defensive/passive investors and a second half  which brought the reverse," Cooperman and Einhorn wrote.

"The critical question currently is which 'city' will dominate in 2017."

Omega isn't the first to point out the potential for stock pickers this year, with many others expecting a strong year. That would be a change in fortune for many active managers, particularly hedge funds, which have been criticized for lackluster returns.

Last year, Omega's flagship fund returned 7.7% net of fees compared to 5.5% for the HFRI equity hedge index, according to the letter. This year through January 18, the fund was up 2.1%, according to the letter.

Last year, the Securities and Exchange Commission filed charges against Omega and its founder Cooperman with allegations of insider trading. Cooperman has said he is innocent and plans to fight the charges.

The firm currently manages about $3.5 billion, according to a person familiar with the matter, and has faced outflows following the charges.

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Lee Cooperman's Omega Advisors has released a 51-page note to investors that details the hedge fund firm's market outlook for 2017.

One big takeaway: Things are looking good for stock investors.

Here are some of the key points from the Thursday letter, which was written by Cooperman, who founded Omega, and the firm's vice chairman, Steve Einhorn:

• Solid S&P 500 growth. The S&P 500 can deliver an 8% to 10% return in 2017, "consisting of earnings per share growth of approximately 8% (aided by a lower corporate tax rate and added share repurchase funded from repatriated cash), a dividend yield of 2% and a slightly lower than current market P/E."
• Low yields. Fixed-income markets in the US and developed economies have Omega expecting US shares to rise, in part because low yields will encourage investors to move to stocks.
• Rising interest rates "should not pose a problem for US shares."Among Omega's reasoning: "A large portion of the lift in bond interest rates to be experienced this year will stem from expectations of more confidence in economic growth and a lift in the bond market term premium/less safe haven flow rather than from a lift in inflation expectation ... these reasons for a bond rate increase should not be problematic to the S&P 500 P/E."

"If our S&P 500 [earnings per share] and bond rate discussions is correct, investors should likely have their 'cake and eat it too' in 2017 — well above average earnings growth without an attendant problematic lift in bond interest rates," Cooperman and Einhorn added in the letter.

A copy of the note, which also detailed why 2017 would be a great year for active managers, was reviewed by Business Insider.

Last year, Omega's flagship fund returned 7.7% net of fees compared with 5.5% for the HFRI equity hedge index, according to the letter. This year through Wednesday, the fund was up by 2.1%, according to the letter.

The Securities and Exchange Commission filed charges against Omega and Cooperman last year with allegations of insider trading. Cooperman has said he is innocent and plans to fight the charges in court.

Omega manages about $3.5 billion, according to a person familiar with the matter, and has faced outflows following the charges.

SEE ALSO: LEE COOPERMAN'S OMEGA: 2017 is the year for stock pickers

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Hedge funds have a reputation for being shrouded in mystery.

But SumZero, an online community of buy-side professionals, has just made them a little less mysterious by revealing how much some people in the industry get paid.

Their 2017 compensation report for hedge fund professionals analyzes the 2016 compensation information of approximately 4,500 of their more than 13,000 members.

The report breaks down the compensation of those users based on a number of factors including job title, years of experience, firm size and investor performance.

"Title remains an important factor in compensation at hedge funds, even when accounting for experience," the report said. "Thus while years in the industry are important, titles and the corresponding responsibility come with greater monetary rewards."

The median pay for hedge fund executives, including bonuses, was $400,000. That number is flat compared to 2015. Now that may not sound like a lot when you think of all the billionaire hedge fund managers covered in the media, but SumZero's community skews younger, and wealthier members tend not to disclose their information.

In addition, it is important to note that there are thousands of hedge funds, with a large number of small funds and a handful of industry giants. Some of these small funds might be staffed by a single employee.

To read the report in full, click here.

The median pay for hedge fund executives, including bonuses, was $400,000.

Those working at bigger funds tend to earn more.

It pays to be in New York.

Mutual funds and hedge funds are full of excuses, according to the man who revolutionized investing for Main Street.

John C. Bogle created Vanguard, which in 1976 launched the first index fund – a fund that passively tracks the stock market.

Passive investing took some time to catch on, but in recent decades index funds like Vanguard's have eaten up the assets of active managers like mutual funds and hedge funds, which try with their own analysis to beat the markets.

Active managers face a big business problem with the indexing trend. Active management fees are much higher than index funds', and at the same time many active managers aren't outperforming their index benchmarks – leading investors to question why they should pay money for underperformance.

Meanwhile, lots of criticism has been leveled at index funds – from allegedly creating anti-trust concerns to distorting markets – but Bogle won't have any of it.

In an extensive interview with Business Insider, Bogle laid out his counterattack against those that criticize passive investing. Here's an excerpt from our chat (emphasis added):

Levy: Another criticism I hear is that index funds are somehow distorting the market. How would you respond to that?

Bogle: You just look at the math. I won't get into the damn trading in ETFs, trading from one bank to another. I don't see how that distorts the market because it's bankers trading with bankers.

As for the traditional index funds like ours, we’d probably account for — let me guess — less than 1% of the volume trading on the New York Stock Exchange. We just go in and buy the darn stock and hold it forever. And if we get more money in, we buy some more, and if we have money going out, which is pretty rare these days, we sell some. It's not a big part of the marketplace.

People are just throwing up a whole lot of straw men in the hope that they can find some piece of mud that will stick. That's probably what I'd do if I were in their position.

These active managers have a real business problem. They are losing money. Vanguard accounts for over 100% of the cash flow in the industry. One firm. All the other firms in the industry together are losing money, losing cash flow. Of course they don't like it. I understand that. But it was never my design to build a colossus.

To read the full Business Insider interview with Bogle, head over here.

SEE ALSO: The man who transformed investing for Main Street sees a bleak future for Wall Street's money managers

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Elliott Management, the $31.6 billion New York hedge fund run by Paul Singer, sees a major change coming to the financial markets as a result of President Donald Trump's election. 

It's just too soon to know exactly what will follow.

"Much of the contemplated agenda is supportive of growth (e.g., reforming the tax code, streamlining regulation and expanding natural resources production)," the fund wrote in an unsigned fourth-quarter letter to investors. "Other proposals could be harmful to growth depending on how they are implemented (e.g., more restrictive trade policies and tariffs)."

Stocks have rallied to record highs since Trump's election, with the Dow Jones Industrial Average gaining more than 9%, in part as investors have focused on the growth-supportive aspects of Trump's presidential promises. Trump has promised to slash regulation on the environment as well as taxes. 

But some are worrying that this sudden run-up has stock's looking expensive again. The cyclically adjusted price-to-earnings ratio, a valuation metric based on the last 10 years of average earnings and calibrated for inflation, is at the highest level since the early 2000s.

In the letter, Elliott also raises the risks that this run-up in shares poses.

"It is too early to determine, at what may be the dawn of a new era, whether stock prices are too far 'over their skis' or are actually on the verge of reflecting the opportunities posed by the low baseline for potentially much higher growth created by the reversal of eight years of growth-repressive and distorted fiscal and monetary policies.

Similarly, it is premature to conclude whether bond markets have been overly pessimistic these last few weeks or if the recent declines in prices are only the beginning of a sustained rise in interest rates. After all, even at current levels of bond prices, which are down several percent from their highs just a few months ago, bond prices do not provide a reasonable return after accounting for current inflation, much less the rate of inflation which could be expected if economic growth picked up meaningfully."

Elliott's flagship fund returned 4.4% for the fourth quarter and 13.1% last year, according to the letter.

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Hedge funds have a reputation for being shrouded in mystery.

But SumZero, an online community of buy-side professionals, has just made them a little less mysterious by revealing how much some people in the industry get paid.

Their 2017 compensation report for hedge fund professionals analyzes the 2016 compensation information of approximately 4,500 of their more than 13,000 members.

The report breaks down the compensation of those users based on a number of factors including job title, years of experience, firm size and investor performance.

"Title remains an important factor in compensation at hedge funds, even when accounting for experience," the report said. "Thus while years in the industry are important, titles and the corresponding responsibility come with greater monetary rewards."

The median pay for hedge fund executives, including bonuses, was $400,000. That number is flat compared to 2015. Now that may not sound like a lot when you think of all the billionaire hedge fund managers covered in the media, but SumZero's community skews younger, and wealthier members tend not to disclose their information.

In addition, it is important to note that there are thousands of hedge funds, with a large number of small funds and a handful of industry giants. Some of these small funds might be staffed by a single employee.

To read the report in full, click here.

The median pay for hedge fund executives, including bonuses, was $400,000.

Those working at bigger funds tend to earn more.

It pays to be in New York.

The portfolio manager behind Elliott Management's infamous Argentina bet is stepping down.

Jay Newman, a lawyer who joined New York-based Elliott in 1995, is stepping down and will act as a consultant for Paul Singer's $31.6 billion hedge fund firm, according to a January investor letter reviewed by Business Insider.

"Newman has decided to retire from being a Senior Portfolio Manager and being involved in the hedge-fund industry on a full-time basis," the investor letter added.

Newman didn't immediately respond to a request for comment.

In the early 2000s, Elliott started buying up Argentinian debt. According to a 2016 Wall Street Journal report, Newman's thinking on the matter went like this: "If Argentina’s economy improved, the bonds would gain in value. If the nation defaulted, Elliott would join a creditor committee, as in any restructuring, and push to profit from a debt restructuring."

Last year, Argentina agreed to pay $4.65 billion to Elliott and three other hedge funds to settle its debt saga. Elliott reaped gains of 10 to 15 times the money they put on the wager 15 years prior, according to the Journal report. 

SEE ALSO: Paul Singer's Elliott: '8 years of growth-repressive and distorted fiscal and monetary policies' are coming to an end

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The billionaire hedge fund manager and big Republican donor Paul Singer has long criticized Dodd-Frank, the post-financial-crisis regulation intended to prevent another meltdown.

Now that President Donald Trump's administration is expected to dismantle the regulation, Singer's $31.6 billion hedge fund is weighing in again, calling to revamp the law formally known as the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"The financial system needs to be freed from the dysfunctional dictates of this ineffective law and properly and efficiently regulated instead," Elliott Management said in its fourth-quarter letter to investors.

A copy of the letter, dated this month, was obtained by Business Insider.

"Calling for the repeal or reform of Dodd-Frank is not the same as saying that the financial system needs to be 'deregulated,'" the letter added. "Dodd-Frank did not adequately address the problems that led to the crisis, and in fact created new problems by establishing new and unnecessary debt resolution schemes and by explicitly identifying certain institutions as too big to fail."

In short, Elliott sees several issues with Dodd-Frank, including:

• The Orderly Liquidation Authority, whose power "to seize massive financial institutions which it deems to be merely in 'danger of default,'" is, in Elliott's words, a "dangerous" expansion of regulatory power.
• The Volcker rule, a Dodd-Frank provision that is supposed to "ban proprietary trading by organizations which have insured deposit-taking entities," according to Elliott. "But the ban is metaphysical, has significant loopholes, diminishes market liquidity, and is the wrong approach to mitigating and managing risk," it said.

Elliott proposes several solutions, including allowing bailouts, refining margin requirements for big investors and counterparties, replacing the Volcker rule, and repealing the OLA, among other things.

Elliott Management was one of the top hedge fund donors in the 2016 election cycle, giving about $27 million to conservative groups and Republican candidates, according to public filings tracked by the Center for Responsive Politics. Singer backed Republican Sen. Marco Rubio of Florida for president.

Here are the solutions that Elliott proposes, according to the letter:

• "Every financial institution and counterparty globally needs to post initial margin plus daily two-way mark-to-market variation margin on all derivatives positions, regardless of the institutions' or counterparties' credit quality or status as a sovereign, 'end-user,' speculator or investor."
• "The OLA must be repealed. There is no need for a separate resolution authority for large financial institutions, especially one which gives such arbitrary authority to a tiny group of regulators who have no ability to discern, in the midst of a crisis, what the heck is actually going on and what needs to be done."
• "'Living wills' are a darkly comic fantasy which ought to be abolished immediately. These documents cannot possibly describe the quantity, scope, shape, direction, or solution for the next wave of losses in the next GFC, and they effectively represent a 'feel-good' hallucination."
• "The Volcker rule, which currently spans hundreds of pages of overly complex dictates, should be replaced."
• "Maybe a restoration of some version of the Glass-Steagall Act which separated investment banking and trading from commercial and residential whole loan lending, or some other solution could be the answer."
• "In actual crisis situations, however, it is important that the government retain the ability to render open bank assistance, lending money on a secured basis or investing in equity where appropriate and attractive."
• "The Consumer Financial Protection Bureau, currently an 'independent bureau' within the Fed, should instead be directly accountable to executive and congressional oversight just like any other federal agency."

The Elliott Associates L.P. fund returned 4.4% for the fourth quarter of 2016 and 13.1% for last year, according to the investor letter.

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One of the most senior women in finance is headed to run investing for billionaire philanthropist and investor George Soros.

Dawn Fitzpatrick, a senior exec at the asset-management arm of UBS, is taking over the position of chief investment officer for Soros Fund Management. She will oversee money for Soros, his family, and the Open Society Foundations, Soros' philanthropic arm.

A spokesman for Soros confirmed the hire. Bloomberg earlier reported the news.

Fitzpatrick replaces Ted Burdick, who left the position last fall but remained at the firm. While her start date is unclear, Fitzpatrick would be Soros' seventh CIO at Soros Fund Management since 2000.

At UBS, Fitzpatrick oversaw more than 500 billion Swiss francs across investment teams, according to her UBS bio. She previously was the head and CIO of a multibillion-dollar hedge fund owned by UBS. Fitzpatrick started her career in 1992 with O'Connor & Associates as a clerk on the American Stock Exchange.

SEE ALSO: What does George Soros want for his 86th birthday? A new CIO

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Elliott Management, the $31.6 billion New York hedge fund run by Paul Singer, is prepping for a wide swath of market moves as Donald Trump's presidency takes shape.

"Now more than ever, we want to be positioned for as many permutations as possible in order to preserve capital if market conditions deteriorate," Elliott wrote in its fourth-quarter letter released in January, a copy of which was reviewed by Business Insider.

Investors are battling uncertainty from the US in the wake of Trump's election win. Stocks had rallied to record highs since the election in November but dropped earlier this week after Trump's executive order barring people from seven Muslim-majority countries from traveling to the US.

In its letter, the hedge fund firm said it would not try to predict "the success or failure of a government's economic and monetary policy mix," but added that "it is essential to try to figure out how the central banks will exit from QE, ZIRP, and NIRP," referring to measures that global central banks took following the 2008-09 financial crisis.

"There is a deep underlying complacency which we think permeates global financial markets," the letter said. "We believe that the global confidence in the placidity and boundaries of inflation (and global financial risk) is misplaced and overdone."

Here's more from the letter (emphasis added):

"Because the monetary policies pursued throughout the developed world since the GFC were unprecedented, the outcomes of the foregoing scenarios are unknowable. Nevertheless, it is essential to try to figure out how the central banks will exit from QE, ZIRP, and NIRP.

"It will be interesting to watch. If inflationary expectations get rolling, it might be amazing how quickly they take hold. 'Very quickly' would be in rough alignment with the magnitude of the monetary extremism of the post-GFC period, but there is no way to predict exactly how it will all play out."

And:

"There is a deep underlying complacency which we think permeates global financial markets. The basically-low volatility of the last eight years has led to a widespread assumption that financial market volatility has been bottled and will remain controlled.

"Moreover, despite the radical monetary policy which has become orthodoxy for the entire developed world's central banks, there is no fear of a near-term eruption of significant systemic price inflation. It is a fool's errand to predict the near-term course of inflation (and global central bankers and policymakers have failed miserably and continuously in performing this errand), but we believe that the global confidence in the placidity and boundaries of inflation (and global financial risk) is misplaced and overdone."

The Elliott Associates L.P. fund returned 4.4% for the fourth quarter and 13.1% last year, according to the letter.

SEE ALSO: One of the most senior women in investing is going to work for George Soros

DON'T MISS: Paul Singer's Elliott: '8 years of growth-repressive and distorted fiscal and monetary policies' are coming to an end

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London-based fund of funds LCH Investments, a subsidiary of Edmond de Rothschild Capital Holdings Limited, just released its annual top 20 "most successful money managers" list for 2016.

The list measures net gains, after fees, of hedge fund managers since their respective funds' inception.

We've included the top seven fund managers below.

As a group, they manage more than $275 billion in assets, and have generated more than $200 billion in gains since inception.

They generated $10.6 billion in returns in 2016, with one of the seven, George Soros' Soros Fund Management, losing money over the year. 

7. Och Ziff - Daniel Och

Net gains in 2016: $1.1 billion

Net gains since inception: $23.1 billion (1994)

Fund's assets under management: $33.5 billion

Highlights: Och-Ziff Capital Management agreed to settle charges of bribery, paying nearly $200 million to the Securities and Exchange Commission, in September. The hedge fund's CEO, Dan Och, agreed to pay nearly $2.2 million to settle the charges with the SEC, as did the firm's CFO, Joel Frank. The firm was accused of bribery in its financial dealings in Africa, which the SEC says included run-ins with Muammar Gaddafi's relatives.

The fund also found itself the recipient of some savvy investing advice from a 24-year old Chipotle cook. 

6. Appaloosa - David Tepper

Net gains in 2016: $0.7 billion

Net gains since inception: $23.5 billion (1993)

Fund's assets under management: $15.8 billion

Highlights: Tepper came out in support of Hillary Clinton ahead of the US election, calling Donald Trump, who went on to win the election, "the father of lies." He has said however that the US would benefit from some infrastructure spending, a key leg of Trump's campaign platform. 

5. Citadel - Ken Griffin

Net gains in 2016: $1 billion

Net gains since inception: $25.2 billion (1990)

Fund's assets under management: $24.1 billion

Highlights: Citadel has been hiring, recently adding portfolio manager Jennifer Pollak, who moved from Folger Hill Asset Management. Citadel's Aptigon unit last year poached about 17 portfolio managers from Visium Asset Management amid an insider-trading scandal.

Citadel is shutting down one of its four stock picking units a little over a year after launching.

Ravelin Capital, a San Francisco-based unit of Ken Griffin's $26 billion hedge fund firm, is shutting down, according to people familiar with the matter. The unit struggled with underperformance, one of the people said. 

Jeff Runnfeldt, who headed the unit, left on Tuesday, January 31. At the time of Runnfeldt's hire, the unit set out to manage as much as $1 billion with ten teams, Bloomberg reported at the time.

Runnfeldt had previously worked at Citadel for about a decade, up until 2012, before being rehired to head Ravelin, a LinkedIn profile shows.

The unit included six teams, and the majority of those teams are moving to one of Citadel's other units, Global Equities, one person said.

“Citadel has decided to consolidate Ravelin Capital into our Citadel Global Equities business," a spokesman for Citadel said. "This decision will further strengthen Global Equities by incorporating the best ideas and strongest talent from Ravelin.”

Citadel has just been named one of the most successful hedge funds of all time. The firm ranked fifth on a list put together London-based fund of funds LCH Investments ranking funds by net gains, after fees, since inception.

The hedge fund giant is also known to be one of the most competitive firms, with former employees and recruiters describing a culture that churns through portfolio managers and analysts who don't put up good performance numbers.

The Ravelin shutdown comes amid several other closures. Last year, Blackstone's Senfina platform closed following double-digit underperformance, less than two years after launching.

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NEW YORK — US hedge fund manager Dan Loeb is betting President Donald Trump will be good for investments thanks to his planned mix of tax cuts, reduced regulation, and infrastructure spending.

"This environment is undoubtedly better for active investing — just as active investing was considered to be on its deathbed," Loeb wrote in a letter to clients of his $15 billion (£11.8 billion) Third Point LLC on Wednesday.

A shift from government monetary stimulus to measures that will increase personal and corporate spending will create lower correlations between various types of securities and greater dispersion of results within them, such as stocks, Loeb said.

Higher interest rates will also create investment opportunities, Loeb added.

Third Point's main hedge fund lost 1.1% in the fourth quarter, wrapping up a year that Loeb said was "disappointing." The fund gained only 6.1% in 2016, below its 15.7% average annual return since 1996 and less than an approximately 12% gain for the S&P 500 index, with dividends.

Loeb wrote he had made changes to the New York-based Third Point's investment holdings immediately after Trump's election win, shifting to stocks and away from corporate and structured credit. Third Point now has similar-size holdings in the healthcare, technology, industrial, and financial sectors, according to the letter.

One large change was in securities of financial companies. The sector now represents 11.8% of the fund, up from 4.4% on November 8, according to the letter. Loeb's focus is now on banks and brokers and includes exposure to Japan.

"The pendulum in monetary policy has begun to shift away from the past decade of extraordinary easing just as the pendulum in fiscal policy has begun to shift away from austerity and its limiting factors," Loeb wrote. "The US elections served as a marker for these policy shifts which, in our view, are bullish for rate‐sensitive financials."

Loeb did urge some caution on investment during the Trump presidency, noting hedges on Third Point's portfolio. But he said that even volatility could be a boon.

"While America may or may not be made great again, there is no question that the rules are literally being rewritten," Loeb wrote. "We do not plan to trade the tweets but we expect an increasing number of real and, even better, fake dislocations to create some extremely rewarding investing opportunities."

Third Point's offshore hedge fund rose 2.6% in January, according to a person familiar with the situation who requested anonymity because the information is private.

(Reporting by Lawrence Delevingne; Editing by Lauren Tara LaCapra and Himani Sarkar)

SEE ALSO: THIRD POINT: 'The most disappointing and bizarre election in our country's history'

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Two Sigma, a $40 billion hedge fund that uses advanced technologies to find investment opportunities, has grown at a rapid rate over the past few years.

The number of employees at the firm has grown 400% over the past seven years, and it now has 1,000 staff members in offices in New York, Hong Kong, Houston, London, and Tokyo.

It has generated $13.1 billion in returns since its inception in 2002, according to LCH Investments, a London-based fund of funds, making it the 20th-most successful fund of all time. Only one fund, Brevan Howard, has generated more in a shorter time period.

Evan Anger is a senior vice president in recruiting at the firm, and at a breakfast event organized by the recruitment firm Options Group, he explained how the firm identified the next generation of leaders within the firm.

He said it's all about three things:

• Engagement. Anger and his colleagues in HR look at how engaged an employee is in what they're doing and life at the company, as well as their level of engagement with the company culture.
• Contribution versus scope of the role. The firm also tracks how actively employees engage with topics outside their day-to-day role. That helps provide insight into whether someone could one day step up or take a bigger role in a different team.
• Career velocity. How fast is someone rising through the ranks? Are they being promoted ahead of schedule?

It sounds pretty simple, but it's useful to know.

SEE ALSO: The president of the New York Stock Exchange talks history, technology, and simplifying trading

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