The $JHQEX case
A professional money manager, Ham Reiner, the PM of JHQEX is most certainly one. Is always laser-focused on execution costs. Paying away excess bid-offer spread kills performance. When managing the hedged equity fund Ham has discretion on how he executes his mandate. I for one do not understand why the options portion of his hedge is executed with all identical strikes and maturities but let’s ignore that for the moment. Perhaps he is considering a change.
However, as of Monday, it became fairly certain that to execute his hedge he or his counterparty needed to rapidly liquidate 58% of his AUM. The impact of that liquidation would fall most hard on his own fund, If the counterparty sold it all at once and had the maximum market impact the put spread strikes he bought and the call spread strikes he sold would be much lower than the strikes he would get if he minimized market impact.
This is the most obvious decision any professional portfolio manager can make. Those of you that manage money know this to be true! So what should Ham do? The moment he saw the problem he should create a spread-out selling pattern designed to make a minimum impact. He has a risk that the old call would go into the money so he should probably consider that but as of today, that’s not gonna happen. As for the strikes. It’s just nuts that he is so concentrated. I expect that to change either today or in the future.
Anyway for those looking for 50000 ES for sale. If Ham does this I would be really surprised. His performance and his reputation with his shareholders would suffer. I have way more faith in the quality of the PMs at @JPMorganAM and expect minimal market impact.
One Response
The very next time I read a blog, Hopefully it wont disappoint me as much as this one. After all, I know it was my choice to read through, nonetheless I really believed you would have something helpful to talk about. All I hear is a bunch of crying about something that you could possibly fix if you werent too busy searching for attention.