The Market Huddle Index Pre-Positioning Fallout (Guest: Peter Haynes)
Mar 18, 2025
In this discussion, Peter Haynes, Managing Director of Index and Market Structure Research at TD Cowen, dives into the world of index rebalancing and its recent upheavals. He shares insights on a staggering $900 million loss experienced by hedge funds linked to pre-positioning ahead of index events. Haynes also tackles the complexities of ETF markets and the repercussions of sudden index rule changes. Additionally, he highlights concentration risks within the Russell 1000 Growth Index and reflects on historical market manipulation practices.
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$900 Million Loss on Index Bets
- Hedge funds lost $900 million betting on index additions and deletions, as reported by Bloomberg.
- This highlights the changing landscape of index rebalancing and its impact on hedge fund strategies.
ETFs: Feature Becomes a Bug
- The ETF landscape has evolved, with some bespoke, style-based funds becoming too large, impacting index rebalancing.
- Large index funds now recognize hedge funds as part of the rebalancing ecosystem.
AppLovin Short Report Impact
- In 2022, hedge funds suffered losses due to incorrect bets on Russell index rebalancing.
- A short report on AppLovin, a top S&P 500 candidate, caused a 20% stock drop, impacting hedge fund positions.
