Millennium hedge fund loses ₹7,800 crore due to global stock rout: Report

The multimanager hedge fund Millennium Management's loss was reported by just two index rebalancing teams.

Giant multimanager hedge fund Millennium Management has lost about $900 million (over ₹7,800 crore) so far this year from two teams focused on index rebalancing, Bloomberg reported citing people familiar with the matter.

One of the two loss-making team was led by Pratik Madhvani. (Pixabay)

The loss was caused by global stock market volatility upending the teams' strategies.

The larger of the two teams, named SRBL, is led by Glen Scheinberg while Dubai-based Pratik Madhvani manages the other crew focused on strategy.

Index rebalancing — often highly leveraged — involves betting on which companies enter or exit various stock indexes, and it can be lucrative for giant multimanager hedge funds like Millennium.

Yet bouts of market unrest combined with the crowded nature of the trades can also trigger significant losses — even if portfolio managers bet on the right stocks.

Hong Kong-based senior portfolio manager Jeremy Ma, who also specialized in index-rebalancing trades, has left Millennium, according to a person with knowledge of the matter.

The returns from index rebalancing strategy have turned negative before too, including in 2022. However, it has seen widespread acceptance over the past couple of decades. One fund manager estimated that just a dozen firms used index rebalancing in 1998, a number which skyrocketed to at least 50 firms in recent years. Falling returns, however, drove some traders away from the strategy.

The upside can be significant, though. Scheinberg and Madhvani’s groups were both profitable last year.

Millennium, which manages about $75 billion, was down less than 1% this year through February, even with the losses. The company has 6,100 employees globally at over 140 employee locations with more than 340 investment teams.