Trading & Options · Profile from Trading and Options Research Companion
Malachite Capital Management
The New York short-volatility relative-value manager founded in 2013 by two former Goldman Sachs equity-derivatives professionals, Jacob (Jake) Weinig and Joseph (Joe) Aiken (Bloomberg calls them traders; Institutional Investor calls them "VP-level sales guys"), with a $25m seed from Global Endowment Management (II), which grew to ~$600m by selling equity-crash protection — in II's words, insurance to Wall Street banks against "infinite losses" — and capturing the short-term volatility risk premium, then told investors on 17 Mar 2020 that it would dissolve its funds after margin calls in the COVID crash (Bloomberg; Shared facts). Its reported record was strong — +22% in 2016, +21% in 2017, ~10% a year since inception to January 2020 (Bloomberg, reported; unaudited, rule 4(c)) — and its book was reportedly worth "upward of $1.5bn" in early 2020 on ~$600m of capital; when it failed it reportedly left a hole "twice as large as the fund itself" (II, 24 Jun 2020 — not confirmed elsewhere; conflict: with positions ~2.5× capital, a deficit of twice the fund needs unlevered losses of ~120% of notional or higher leverage, so the two reported figures do not reconcile — both kept as reported, see the dissolution move). No regulator brought an action and no audited loss figure exists. This is a single-event entity with five moves (rule 6). Its story turns on survival: short gamma sized on calm-period data, in a market that gapped.
At a glance
- Founded
- 2013 (Sep 2013 per Bloomberg as cited in the Delta-hedged short options file); founders left Goldman in 2013 (Bloomberg via The Wealth Advisor)
- Founders
- Jacob Weinig and Joseph Aiken, each owning half (II)
- Headquarters
- New York
- Ownership
- Private partnership; four-person staff in 2019 (II estimate)
- Seed
- $25m from Global Endowment Management, a former client of the founders (II)
- Strategy
- Equity volatility relative value; one of three key strategies was to "capture short-term volatility risk premium within the global equity markets" (Bloomberg); sold crash protection to banks and borrowed from banks to scale it (II) (Delta-hedged short options; Variance and volatility swaps)
- Scale (dated, reported)
- ~$300m (May 2017, Weinig to Futures Magazine via Bloomberg); ~$600m (Mar 2020, Bloomberg; Shared facts); positions "upward of $1.5bn" early 2020 (II)
- Fees
- 1% management, 15% performance, no hurdle (client fee schedule, II)
- Record (reported, unaudited)
- 2016 +22% (+22.3% per Futures Magazine via II); 2017 +21%; ~10% annualised inception to Jan 2020 (Bloomberg)
- Counterparties
- Prime brokers Goldman Sachs and Société Générale; margin calls from BNP Paribas (Bloomberg via The Wealth Advisor)
5 strategic moves analysed
Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.
2013
Founding With an Endowment Seed
Founding or fund launch
2015
Selling Crash Insurance to Banks
New strategy / leverage, sizing or risk-limit change
2017
Growth Push Toward 1bn
Capital raise, fee change or return of outside capital
2020
Aftermath Counterparties and Consultants
Counterparty or clearing event / reputational fallout
2020
March Margin Calls and Dissolution
Loss, drawdown or blow-up response / closing a fund