Chicago Vol-Selling Fund Blows Up, Down More Than 50% After "Significant Losses"

According to its website, the Chicago-based LJM Partners fund invests in "volatility strategies" with an emphasis on selling volatility, which "are traditionally uncorrelated with other assets and are capable of producing postive [sic] returns in a wide range of market conditions" and one look at the performance of its recent strategies, of which the LJM Moderately Aggressive Strategy is the most popular, with AUM of $366MM, confirms this to be the case.

Until today.

Not surprisingly, the record surge in volatility crushed the fund which specializes in vol-selling, and according to a letter from its founder and chairman Tony Caine, seen by the WSJ, the fund told its investors on Tuesday that it had suffered significant losses.

"LJM strategies have suffered significant losses," Caine said an email seen by the Wall Street Journal."At this time, the portfolio management team is trying to hedge with as many futures as possible to attempt to insulate portfolios from further losses."

"Our plan is to go to a defensive position depending on liquidity of options markets. Our goal is to preserve as much capital as possible" Caine said, admitting that the ability to do that depends on market conditions and liquidity.

Alas, one look at the NAV of the fund confirms the worst: with losses of over 50%, it is almost certainly lights out for this particular vol-seller.

The company website lists a total of $547 million in assets under management, including proprietary assets, and was founded in 1998. It will most likely liquidate 20 years later.

LJM was not the only casualty of the record VIX spike.

Overnight, some of the most prominent inverse VIX ETNs were terminated: first Nomura said it would redeem VIX-linked NEXT notes, while on Tuesday morning, Credit Suisse announced it would "accelerated" one of the most popular inverse VIX ETNs, the XIV. We also highlighted some European fallout, including UK's Man Group and Option Solutions, which suffered losses as great as 65% after the historic surge in the VIX. Bill Gross likewise was hit, with yesterday's market move sending his Janus unconstrained fund back in the red for the year.

Finally, meet the guy who reportedly blew up the fund:

CTA PROFILE - Anish Parvataneni from John Lothian Productions on Vimeo.


exartizo Tue, 02/06/2018 - 20:41 Permalink

so basically a little collateral damage. nothing the Banksters can't handle, if they even need to.

bottom feeding vol sellers have gotten fat and happy for a very very long time.

their fat and happy complacency should not be rewarded, and no one should shed a tear that they lost their collective asses betting on a protracted persistent market aberration gone belly up when they least expect it.

with any luck or fortune we might actually see a few more of these allegedly "unforeseen" market aberrations actually aided and abetted by real world rubber band snap back asset correcting events not unlike what happened yesterday.

but yeah.

the Big Boy Banksters were all clued in before hand, no doubt.

Alliteration fully intended.

OccamsCrazor Tue, 02/06/2018 - 21:21 Permalink

People aren't getting the implications of all of this.  


Keep thinking happy thoughts though, and that the markets are 'a-ok', and stocks will resume their normally scheduled programming, despite this temporary interruption of ZERO liquidity. 


P.S. There are a WHOLE LOT MORE derivatives blowing up behind the scenes. Capital is being immolated at a rate that no one can even fathom.  

booboo Tue, 02/06/2018 - 21:32 Permalink

If you are purposely walking on the razors edge with a strategy that can wipe you out over night and that cannot be properly hedged you deserve to be shot up with ecstasy and fed into a wood chipper feet first.

El Hosel Tue, 02/06/2018 - 22:16 Permalink

So, was this "episode" with VOL an intentional clearing of some of this crap and a step towards taking the Fucking training wheels off the market.... Or an accident?