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Sticker Shock: Small Hedge Funds Seen Ditching I-Banking Research Under MiFID

August 30, 2017 Tyler Durden 0

For the past several months we’ve discussed many theories about how the new MiFID II rules in Europe might drastically change the investment banking research business model.  For those who haven’t followed this narrative, MiFID II is a new set of regulations in Europe that requires investment banks to charge separately for research as opposed to just lumping it into an asset manager’s trading fees. 

Here are a couple of our thoughts/predictions:

  1. Investment banks will find that there just might be a very large bid/ask spread between what they think their research is worth and what their clients are willing to pay for it.
  2. Exorbitant research fees will create even higher barriers to entry for upstart hedge funds and cause existing small funds to ditch research vendors altogether.
  3. Large asset managers will be forced to cut back their research vendors leaving smaller, independent research shops doomed.

So far, it looks like 2 out of 3 of our predictions have come true. 

Just last week our first prediciton seemingly came true when Deutsche Bank announced plans to slash the price of their fixed income research in half due to a “lack of demand” (see: Deutsche Bank Forced To Slash Fixed-Income Research Price By Half On Lackluster Demand). 

Now, as Bloomberg points out today, small hedge funds are seen ditching pricey research packages because they simply can’t afford it.

“The numbers I’ve heard in terms of what’s going to be paid looks completely impossible for smaller managers,” said Samuel Gruen, who started Lightfield Capital last year and whose his firm manages $20 million from London. The rules will force people to “rethink the investment process when launching a hedge fund.”


Theron de Ris, who oversees less than $10 million at Eschler Asset Management, said he plans to stop getting outside research altogether because of the new rules.


“I’m not going to consume sell-side research for the foreseeable future,” said de Ris, Eschler’s London-based managing partner. “It’s not going to change my world if they stop coming.”

Equity Research


Of course, in the end, MiFID II’s new research rules only serve to reinforce the advantages that larger and wealthier asset managers have always had over smaller funds.  Since 2009, over 80% of hedge fund failures have come from small funds with under $100 million in capital to manage and that’s likely to only get worse.

Hedge Funds


Meanwhile, even Tony Chedraoui, founder of Tyrus Capital which has $2.3 billion in AUM, tells Bloomberg that his firm is evaluating what research is essential and what it can safely “scrap.”  All of which means that prediction number 3, on our list above, is well on it’s way to coming to fruition.

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Daesh attack forces Iraq forces to retreat

August 30, 2017 Middle East Monitor 0

An Iraqi military source said that a number of joint forces retreated from the South of Ayadiya area, north of Tal Afar district after being intensively attacked by Daesh. In a statement to the Anadolu Agency, Abdul Samad Ahmed Al-Hashimi, commander of the 6th Division of the Iraqi Army, said: “This morning, Daesh launched field armed attacks, accompanied by attacks of Katyusha missile and 80mm calibre mortars, on the army groups and Popular Mobilisation Forces that were stationed in the south of Ayadiya.” He added that the attack caused the death and injury of a group of soldiers and damaged and destroyed various military vehicles. Al-Hashimi continued saying that Daesh’s attacks forced the military units to stop their move into […]

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Russia, China Join Together In Space Exploration Effort

August 30, 2017 Tyler Durden 0

Authored by Peter Korzun via The Strategic Culture Foundation,

China and Russia are set to sign a milestone agreement in October on joint space exploration from 2018 to 2022, sending manned missions to the Moon for the first time.

The bilateral agreement will cover five areas including lunar and deep space exploration, developing special materials, collaboration in the area of satellite systems, Earth remote sensing, and space debris research.

This is the first bilateral agreement to cover a partnership spanning five years.

It is to be signed against the background of space exploration race the US is trying to win, so the two partners decided to join the efforts. In February, the Trump administration asked NASA to look into the possibility of manning a heavy-lift rocket mission, expected to be launched in 2018, setting the stage for a human return to the Moon.

Russia’s Glavkosmos space launch operator is also working with Chinese partners on joint experiments aboard the International Space Station (ISS). China was interested in buying the world’s most powerful Russian-made RD rocket engines produced by Energomash while Russian Space Systems showed interest in Chinese electronic technology.

The first module of China’s space station Beijing is expected to be launched in 2018. The project is to be completed in 2022. According to the plans, a Chinese mission will be sent to Mars in 2020 to land a robot vehicle for scientific research. Last year, Beijing put into operation the world’s largest radio telescope half a kilometer (0.3 miles) in diameter. In 2014, China caught up with Russia having launched about the same number of satellites – 117 (72% increase in 2011-14). Russia had 118 launched by the time (the number increased by 20% during the same period).

China plans to send astronauts to the Moon before 2036. In March, China announced plans to launch a space probe to bring back samples from the Moon before the end of the year in what state media cast as competition to US President Donald Trump’s ambitions to revitalize America’s space exploration. The Chang’e-5 lunar probe is undergoing a final round of tests and is expected to be on standby for launch. The launch will involve new challenges for China in sample collection, taking off from the Moon and high-speed reentry to the Earth’s atmosphere, making it «one of China’s most complicated and difficult space missions», according to Hu Hao, an official from China’s Lunar Exploration Program. Chinese President Xi Jinping has called for China to become a global power in space exploration. «Not long ago, the United States’ Trump Administration revealed an ambition to return to the Moon. Our country also announced a series of deep space exploration plans», said the official Science and Technology Daily.

The Chinese Chang’e 4, Chang’e 5 and Chang’e 6 probes have a lot in common with the Russian Luna 26, Luna 27 and Luna 28 lunar landers. Bringing the projects together can greatly facilitate progress.

Russia has great expertise and cutting-edge technology to share. China has its own technological breakthroughs and vast financial resources. It’s hard to extensively explore space alone, so joining efforts is a natural thing. Both partners have a lot to give to each other.

In the 1990s, the International Space Station project was unthinkable without Russia, so the US and other Western nations joined it. Russia has been cooperating with the West in space exploration for the recent 25 years but the sanctions and the general deterioration of the relations are pushing it in another direction. In Moscow’s eyes, Beijing is a trusted partner.

Visiting the One Belt One Road forum in Beijing (May14-15), President Putin said «We cooperate in space quite successfully, and there is every chance that we will increase this cooperation. Supplies of our rocket engines to China are on the agenda». According to him, «a high-thrust engine on the agenda and this gives us the opportunity to implement the idea of ??our own wide-body aircraft jointly with Chinese partners. There are all chances to do it».

Russia and China are working within the BRICS (Brazil, Russia, India, China and South Africa) framework to create a unified system of the Earth’s remote sensing. Indonesia, the UAE, Vietnam, Iran and other countries are also considered as candidates for joining the international space research effort.

It’s not about peaceful space research only.

A space arms race of sorts is underway with weapons under development or in the arsenals of China, Russia and the US Space weapons include satellite jammers, lasers and high-power microwave gun systems. The US plans for space weaponization and global ballistic missile defense (BMD) are well known. China tested its DN-3 anti-satellite missile in late July. The test failed but the program is underway. The Russia’s is S-500 Prometey is the world’s most effective weapon – the only one capable of destroying intercontinental ballistic missiles and spacecraft, hypersonic cruise missiles and airplanes at speeds of higher than Mach 5.

Russia and China have been cooperating to prevent space militarization for years but the United States has always obstructed the effort. The first ever draft Treaty on the Prevention of the Placement of Weapons in Outer Space, the Threat or Use of Force against Outer Space Objects (PPWT), was developed by Russia and backed by China to be introduced in 2008. The US opposed the draft treaty due to security concerns over its space assets despite the treaty explicitly affirming a State’s inherent right of self-defense. In December 2014, the UN General Assembly adopted a Russian resolution, ‘No first Placement of Weapons in Outer Space’. The United States, Georgia and Ukraine were the only countries that refused to back the Russian initiative. For years, Russia and China have pushed for the ratification of a legally binding United Nations treaty banning space weapons – a treaty that US officials and outside experts have repeatedly rejected as a disingenuous nonstarter. The United States does not come up with any initiatives of its own.

Putting weapons in space to gain global supremacy is high on the current administration’s agenda. It is generally believed that until now arms systems have not been stationed in space. Weapons of mass destruction are banned from space under the 1967 Outer Space Treaty. But the Treaty does not prohibit the placement of conventional weapons in orbit. No international agreement on non-nuclear arms in space has been reached due to the objection of some states led by the United States.

With all the foreign policy flip-flops, President Trump has a detailed and ambitious space policy. The ground-based BMD systems, the X-37B spacecraft and Geosynchronous Space Situational Awareness Program (GSSAP) platforms could be repurposed into instruments of war in space. US Defense Secretary James Mattis has called for bigger investments into space exploration for defense purposes. Referring to anti-satellite and anti-missile weapons in space, Congressman Doug Lamborn of Armed Services said: «Some of the technical issues around those concepts need to be researched, but there’s a lot of exciting options». The draft National Defense Authorization Act for fiscal 2018 envisages greater emphasis on ballistic missile defense systems and intensification of space exploration efforts.

The weaponization of space will disrupt existing arms control instruments. It may spark a devastating arms race. This year the world marks the 50th anniversary of the 1967 Outer Space Treaty. It’s rather symbolic that it entered into force in October – the month the Russian-Chinese space exploration agreement is planned to be signed. It would be right if the spacefaring nations launched talks on preventing space weaponization. That’s where Russia, China and the United States need to cooperate, setting all other differences aside. This would be a significant contribution into turning the tide away and preventing the arms control erosion that is taking place now. Meanwhile, Russia and China are entering a new phase of mutually beneficial cooperation in what one day could become an international effort led by these two spacefaring nations exchanging high technology to achieve tangible results.

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And The Nation That ‘Cannot Live Without The Internet’ The Most Is…

August 30, 2017 Tyler Durden 0

Have you ever thought about what life would be like without the internet?

Given the volume of time people spend immersed in their smartphones, iPads and laptops, an unconnected life is pretty hard to imagine these days. For the majority of millennials, the time before the world wide web is now nothing more than a distant memory, a memory that’s been eviscerated by the ubiquity and life-changing impact of connected technology.

Interestingly, Statista’s Niall McCarthy notes that it isn’t just millennials who are losing touch with a world without smartphones, emails and social media. Research from Ipsos has found that society in general just can’t live without the internet.

Infographic: Where People Can''t Live Without The Internet  | Statista

You will find more statistics at Statista

18,180 people were surveyed across 23 countries, with more than two thirds of them saying they cannot imagine a life that isn’t prefixed by www dot.

While 73 percent of Americans said they cannot imagine an unnconnected life, the highest share was recorded in India at 82 percent.

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