Millennium Management has reportedly incurred losses of approximately $900 million this year from its index rebalancing strategy, as global stock market volatility has taken a toll. The strategy, which involves betting on which companies will enter or exit various stock indices, is typically highly leveraged and can be profitable for large multi-manager hedge funds like Millennium. However, market turbulence and crowded trades have led to significant losses, even when portfolio managers make correct stock predictions.
The larger of the two index rebalancing teams at Millennium, led by Glen Scheinberg, and another team managed by Pratik Madhvani in Dubai, have both been affected. Despite the losses in this strategy, Millennium's overall asset management, which totals around $75 billion, has seen a decline of less than 1% up to February this year.
Senior portfolio manager Jeremy Ma, who also specialized in index rebalancing trades, has departed from Millennium. The strategy has previously led to decreased returns, notably in 2022. In 1998, only a dozen firms engaged in such trades, but this number has increased to at least 50 in recent years. Despite the current setbacks, the potential for significant gains remains, as evidenced by the profitability of Scheinberg and Madhvani's teams last year.
