Alfonso Peccatiello

''If I join your hedge fund, can I work remotely?''



As we get closer to our launch, we are expanding the team and in the interview process candidates will often ask this question.

The way I look at it is quite simple.

We care about deliverables and culture, not face-time.
So in principle you can work from Mars - that's ok as long as you perform.

Additionally I come from a small town close to the Amalfi Coast and I will be occasionally working from there.
It's refreshing to spend time with your friends, live in a different climate, taste the food you grew up with.

We are humans, not robots.

BUT.

When you join a start-up or a rapidly scaling company, there are a few things that matter more than anything else:

1) Creating a positive culture within your team
2) Getting people plugged in the processes and objectives
3) Building together

Undeniably, all the above is more optimally done spending time together.

I often hear extreme takes on this topic: either remote work 100% as an absolute must, or work in the office is the only way to go.

If you join an emerging hedge fund or a start-up/scaling company, I believe the optimal solution lies somewhere in the middle: build together, create that positive culture, enjoy the flexibility, and set the stage for much more flexibility down the road.

This is the top quality I look for when hiring for my macro hedge fund.



I don’t care where you graduated.

I don’t care if you were the captain of your backgammon team at university.

You can be the smartest person on earth but if you don’t have this specific skill we won’t hire you.

You have to be a nice, kind person.

We spend about 60% of our awake life working with colleagues.

If you don’t have empathy, if you’re not kind with others, if you are not passionate it probably won’t be nice to have you around.

Instead, nice people get along quickly and start rowing in the same direction enjoying the journey.

After all when allocators invest in a new hedge fund, they are investing in people.

And kind, nice people are the best.

From September, investors are welcome to visit us in our new Amsterdam offices.

I can make homemade pizza for you: what’s your order?

And don’t say pizza with pineapple…

Japan will now allow 10-year yields to trade as high as 0.50%.

And while this seems like a minor policy change, it is likely to cause some serious market volatility.

Why?

For years, Japan implemented an aggressively dovish monetary policy stance.

Bank of Japan rates were effectively pinned at 0% for decades.
Large-scale QE was standard practice, and a few years ago the BoJ switched to Yield Curve Control.

This was necessary as permanent QE had led the BoJ to own >50% of the Japanese government bond market, and buying more bonds would seriously alter the functioning of the market.
For days, there were basically no trades happening in the Japanese government bond (JGB) market.

So to keep 10-year yields low, the Bank of Japan moved from targeting a quantity of bonds to buy (QE) to a qualitative measure (YCC).
It succeeded: between 2016 and today, 10-year JGBs traded between -25 and +25 bps like the BoJ wanted.

Why does this matter?

Japan is a huge exporter of capital

Since the '90s, Japanese investors are used to look abroad for opportunities to deploy their domestic excess savings.
For instance, as of July 2022 Japan is the largest holder of US Treasuries in the world.

Japan has accumulated over $1 trillion in USTs as it's a convenient way to recycle excess savings: yield differentials were positive, and often more than offsetting the cost of hedging USD/JPY risks.

The BoJ decision today affects this important flow of capital.

Kuroda announced that 10-year JGB can now trade between -0.50% and +0.50%, hence widening the band for YCC.

Bond futures tanked - but why did he decide to do it today?

Core inflation is rising in Japan, and many analysts expect it to be stable around 2% in 2023.
After years of relentless easing, Kuroda can likely claim ''job done'' and set the stage for his successor to set a new monetary policy in 2023.
A ''victory lap'', if you wish.

The bond market disagrees with analysts and expects inflation in Japan to stabilize around 1%.
But as the game masters are calling for a new monetary policy regime, fixed income investors are now pricing 35 bps of hikes in 2023 and bond volatility tripled (!) since the beginning of 2022.

Now that Japanese investors are getting positively rewarded to keep their cash at home during a global economic slowdown and periods of high macro uncertainty...

...they probably will choose to do that more.

That strengthens the Yen, and negatively affects foreign assets.

When one of the largest capital exporters in the world decides to domestically reward savings with a higher risk-free rate, there are big macro consequences.

Want to know more?

Sign up to https://lnkd.in/ecUp9yWG as I will soon be releasing a deep dive on the BoJ decision there - by doing so you'll receive the article directly in your inbox.

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#japan #boj #bonds #yieldcurve