Pod Shops Are the New Banks
Merger arb, Strategy mNAV, IPO pops, ANZ firings and asking Drake to buy Opendoor.
One thing that I think about a lot around here is that the big modern multimanager, multistrategy hedge funds — “pod shops” like Citadel, Millennium, Point72 and Balyasny — have gotten into many of the businesses that big investment banks were in 20 years ago. The investment banks used to be well capitalized, lightly regulated, adventurous, and willing and able to commit their own capital to make markets more liquid and efficient. Now they are more regulated and risk-averse, and the hedge funds have stepped into some of those roles.
In particular, the big hedge funds are now in the business of committing their own capital to provide liquidity to customers. Well, the banks would call them “customers.” The hedge funds mostly wouldn’t. But there are a lot of institutional investors who need help to do certain trades, who used to get that help by calling up their investment banks, and who now often get it, indirectly, from hedge funds. Trades like: