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Derivatives, Investments & markets, News
By Gontran de Quillacq
On March 2, 2021

Geode hedge fund, loses big on volatility bets during COVID

Geode handles $700 bn of Fidelity's index tracking assets. Geode Diversified, the much smaller hedge fund business, took a 36% loss on COVID's volatility rally. It is now getting the axe.

Fidelity is closing the hedge fund arm of Geode, its index manager, after a 36% loss on volatility.

Fidelity has a large amount of index-tracked indices. In 2001, it started to delegate that high-volume-very-low-margin business to Geode, the Boston-based firm. Geode was spun off as an independent company in 2003, under the management of Jacque Perold. Its index-tracking business has been in constant growth ever since:

Geode also has an active management arm, Geode Diversified, which lost $250m (36%) on derivatives last Spring. That specialized fund managed up to $1 billion of assets at its peak in 2018, with a target of 5-6%. It offered a mix of quant equity, global macro and option strategies. It is understood that Geode Diversified had a 10% allocation ($80m) to a bearish bet on vega/variance.

Fidelity is closing that alternative activity entirelyVince Gubitosi, Geode’s Chairman/CIO since 2007, has been replaced by Bob Minicus, who was in charge of compliance and risks at Fidelity.


Credits to Justin Baer & Dawn Lim at The Wall Street Journal

PS: The first law firms are investigating the affair already.

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