Monday, 1 April 2013

Asteri Capital and the London Whale: A secret history of Glencore's hedge fund


The global commodity trading giant Glencore once had an internal hedge fund that made proprietary bets on global markets. It was called Asteri Capital. What do you think it bet on? Most people would probably make an educated guess and say commodities, but they'd be wrong. It bet on global credit markets, bonds, structured credit products and credit derivatives that have nothing to do with commodities.

Weirdness level 1: Why did Glencore have a credit hedge fund?
Ok, that's pretty weird. Why would a commodity company like Glencore have a bond-trading hedge fund? Asteri Capital actually started life as something called Glencore Finance AG, and was, for all intents and purposes, just a proprietary trading desk within Glencore, based out of its 50 Berkeley Street office in London. It furthermore appears that it was originally just part of Glencore's treasury, the part of the firm that deals with things like borrowing money for the day-to-day operations of Glencore and managing its cash flow. Here it is from the horses mouth (I've added in comments in square brackets):
"Glencore International AG [the Glencore parent company] funded the investment activities of Glencore Finance AG [The prop trading desk] on a trade-by-basis [Translation: Whenever it felt like it]... Proceeds from the sale of investments (including capital gains) were returned to Glencore's treasury [Translation: Glencore's treasury was the hedge fund]. Unlike an investment fund, realized profits did not serve to increase Glencore Finance AG's funds under management [Translation: Profits went to Glencore's treasury instead]... Glencore Finance AG was historically engaged in certain investment strategies which Asteri Capital Ltd (the Fund) will not pursue in the future [Translation: Asteri is a more limited successor operation to whatever we were doing before]."
This Glencore proprietary trading operation was started by a guy called Evan Kalimtgis, who left Dresdner bank in April 2005 - along with several other Dresdner traders like Athanasios Stavrou, Phil Burford and Matt Johnson - to take up residence at Glencore Finance AG. Initially it was just a group of guys who got thrown money whenever the Glencore treasury felt they had a worthwhile trade to put on, and any cash they made got returned to the treasury. After a while though, they gained some nominal independence, and in December 2006 they started accepting outside investment, becoming Asteri Capital Ltd, an FSA authorised investment firm.

In his LinkedIn profile, Athanasios Stavrou describes himself as: "instrumental in setting up Asteri Capital (a multi-strategy credit hedge fund with $450mil in assets under management) and creating the initial track record that led to raising external funds in 2006. Managed the long/short structured credit strategy ($100mil) and co-managed the High Yield Fundamental Credit Portfolio Strategy ($125mil). Both involved directional, relative value, macro and fundamental credit investments through bonds, loans, credit indices and credit derivative products." 

Other LinkedIn info come from Matt Johnson (now at hedge fund Makuria) who describes Asteri as a "multi-strategy credit hedge fund of Glencore" doing "correlation, vanilla and bespoke portfolios... relative value credit trading... convertibles strategy, credit volatility... and prime lending".

Weirdness level 2: Whale ahoy!
So, Glencore's treasury was harbouring a kind-of-secret credit hedge fund. Does this sound familiar? If you've been following the J.P. Morgan London Whale saga it probably does: J.P. Morgan basically set up a hedge fund in its Chief Investment Office, a part of the firm that is supposed to do risk management alongside the treasury, not proprietary trading. A trader called Bruno Iskil was placing massive bets on credit derivatives, which ended up losing J.P. Morgan some $6 billion.

Which brings us to the second weird part of the story. In October 2008 the Asteri Capital team breaks up. Lehman had just gone bust and it was a pretty bad time for global credit markets. Maybe Glencore was cashing out (or cutting their losses), but the team splits and drifts off to various hedge funds and banks. The leader, Evan Kalimpgis, ends up at none other than J.P. Morgan, where he is hired as co-head of risk management in the Chief Investment Office, alongside Achilles Macris, who he used to work with at Dresdner. They find themselves presiding over a guy called Bruno Iskil, aka 'the London Whale'. So, yes, the guy that was responsible for running Glencore's internal treasury hedge fund was the same guy that was later Bruno Iskil's boss at JP Morgan. The moral of the story thus, is that Evan specialises in working in treasuries that ain't really treasuries.

Weirdness level 3: Some political skeletons in the closet
Let's add one final layer of weirdness for good measure. Back when Evan Kalimtgis was running Asteri, he worked alongside a guy called David P. Goldman, a credit strategist. Goldman also happened to have worked with Evan's father, Kostandinos Kalimtgis, on a late-70s book called Dope Inc, sponsored by a guy called Lyndon LaRouche, which argued that the financial elite in the City of London controlled the global drugs trade. Goldman says he was under the "gnostic cult of Lyndon LaRouche" before breaking away and going all neocon and Wall Street. It seems he and Evan's dad turned on Lyndon: Check out the July 15th 2008 comments by a guy called Roger Moore under this post here. Goldman was, until 2009, writing political commentary under the pseudonym 'Spengler', which he admits here.

Calling all investigators! 3 questions that need answering
Glencore, Lyndon LaRouche, global credit trading, London Whale, secret hedge funds? I mean, WTF? This may be a conspiracy theorist's dream, but I don't have the time to investigate. If anyone else has the inclination to go after this though, I'm interested in three questions:
  1. Why was Glencore hosting Asteri in the first place? Did the Glencore management know the guys originally? Were they doing them a favour? Was it part of Glencore's overall strategy, or just an ad hoc add-on to their commodity trading business?
  2. What was Evan Kalimpgis doing at J.P. Morgan after leaving Asteri Capital, and why did he leave before the London Whale scandal broke? Is there any connection between the activities in the two firms he was part of? Is their a crew of traders who hop through corporate treasuries doing proprietary trading instead of risk management?
  3. What is all this stuff about Lyndon LaRouche? How does Goldman go from writing about City of London conspiracy theories to analysing credit derivatives, and why does he end up hanging out with the son of his former writing buddy at a hedge fund in Glencore?
Maybe there are really boring answers to all these questions, or maybe it's a Hollywood film in the making, but please do send links, comments or suggestions if you find anything out.

Some things to do if you enjoyed this article...

I sometimes spend weeks writing these articles, and don't generally get paid to do it, so if you enjoyed please consider doing one or two of the following
  1. Support by buying me a virtual beer
  2. Submit to Reddit
  3. Link to the article from your own blog so your readers can see it too


  1. Financial Activism? Are you wishing to be an Oligarch like Max Keiser or do you really care? It is simple man. Ignore the problems that you perticipate in and
    Otherwise keep naggin about your ideas of why 'they' are wrong and you are 'wright'.

    1. Not sure what this comment has to do with Glencore or London Whale, but thanks for your insights