Friday, April 26, 2013

ARTHNEETI MARCH 2013 ISSUE


With the passing of Banking Laws (Amendment) Bill, the RBI has got the power to issue new banking licenses in order to encourage financial inclusion as well as allow for more penetration of banking services to the public. This move is seen as a game changer in the banking sector with India’s largest business houses as well as NBFCs set to apply for new licenses. But, along with this development comes a greater responsibility for RBI to check the credibility and usage of funds by license nominees in order to regulate the function of new banks so that they do not deploy funds to risky assets or for personal business interests.
To read more Click here

Thursday, April 25, 2013

5,5 miljoner till forskning om alternativa finansmarknader

Jag intervjuades i Lund Business Review för ett tag sedan angående ett forskningsanslag jag erhållit från Marianne och Marcus Wallenbergs Stiftelse och intervjun följer nedan. Originalet kan hittas i Lund Business Review

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5,5 miljoner till forskning om alternativa finansmarknader
Finansprofessor Hans Byström och hans medarbetare på Ekonomihögskolan fick inför
årsskiftet 2013 ett anslag om 5,5 miljoner från Wallenbergs stiftelse för att forska
om alternativa finansmarknader. Vi frågade vad pengarna ska gå till och vem som kommer ha nytta av dem.

Vad är alternativa finansmarknader?
I vårt fall menar vi finansmarknader som trots deras stora betydelse i det finansiella systemet inte undersökts så mycket av akademiker. En vanlig finansmarknad kan ju vara aktiemarknaden på Stockholmsbörsen eller handeln med kronan på valutamarknaden. En ”alternativ” finansmarknad kan vara handeln med kreditderivat; en marknad där man handlar med försäkringar mot företags och länders konkurser och betalningsinställelser. Dessa värdepapper gör det möjligt att skydda sig ekonomiskt mot konkurser hos ens motparter men gör det också möjligt att i kvantitativa termer uttrycka sin tro om sannolikheten för att ett företag eller ett land ska gå i konkurs.

Vad ska de 5,5 miljonerna användas till?
Jag och tre andra disputerade forskare ska forska om finansmarknader. Vi känner varann väl sedan många år så vi ser fram emot att få arbeta tillsammans. Vi ska bl.a. undersöka hur kreditderivat kan användas i olika tillämpningar samt hur rörligheten på olika finansiella tillgångar handlas och prissätts på marknaden. Även derivattillgångar på elmarknaden kommer att studeras.

Vilka tänkbara tillämpningar kan komma ut av forskningsprojektet?
Det är lite för tidigt att svara på. Hur som helst tror vi att kunskap om hur finansiella tillgångar kan användas samt hur de ska prissättas och hanteras i riskavseende är av stor betydelse för samhällsekonomin i stort. Inte minst för ett land som Sverige med dess relativt avancerade finansmarknader och dess öppna globala ekonomi.

Vem kan dra nytta av resultaten?
Sannolikt kommer elbolag kunna dra nytta av våra resultat i sin finansiella riskhantering. Banker likaså. Även Finansinspektionen, Riksbanken och andra övervakare av det finansiella systemet. Vi hoppas också kunna bidra till den akademiska litteraturen om finansmarknaden och generera resultat som andra forskare kan bygga vidare på.

Varför tror du att ni fick pengarna?
Förhoppningsvis en kombination av att Wallenbergstiftelsen tycker att finansmarknadsforskning är viktigt och intressant och att de uppskattar min och mina medarbetares tidigare forskning i ämnet. Jag har forskat om finansmarknaden i snart tjugo år nu.

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Tuesday, April 23, 2013

How to get your PRS Tax Relief statement from PPA ? (April 2013)

In conjunction with the NEW tax relief available from YA2012, many Private Retirement Scheme (PRS) contributors are wondering how can they get the tax statement for income tax filling. To address your concern, here you go... (If you don't know what are we talking about, please find out "What is Private Retirement Scheme?")




To recap, contributions into a PRS scheme can enjoy a tax relief of up to RM3,000 from YA2012 - YA2021. If you did contribute some money into a PRS scheme in 2012, congratulations, you're entitled for PRS tax relief for YA2012. If you haven't, no worry, you still got time to start contributing before end of this year.

Back to the topic, please follow these few easy steps to get it:

Please surf www.ppa.my and click log in. I believe you already get your PIN from PPA when you made your first contribution. If not, please contact PPA and request again.



After log in, you will arrive at the following page. Supposedly, you can download the tax relief statement by clicking "Tax Relief".



However, you will be notified by this message.





Oppsss... What if I didn't keep the receipt or letter given by providers? No worry. Alternatively, you can download the "Consolidated Statement" as a proof and for income tax filling purpose. Hope this could clear your doubts. Happy income tax filing. Thanks.


Finance Malaysia would like to thank Alex Yeoh for his input in this article. Alex is a Licensed Financial Planner with VKA Wealth Planners, whom can advise and distribute multiple PRS products. You may contact him via email alexyeoh@vka.com.my

Monday, April 22, 2013

How to explain Bitcoin to your grandmother

"WHO WANTS TO EXPLAIN BITCOIN TO GRANNY?"
As anyone who doesn't have a degree in advanced computer science knows, Bitcoin is conceptually tricky. Thus, when your grandmother is wanting to buy marijuana off the Silk Road and begins asking you to explain Bitcoin to her, what do you do? Ever since early 2012, when I asked the question 'what the hell is Bitcoin?', I've been trying to find ways to explain it to myself. Initially I used the example of the Borg from Star Trek, but more recently I've come to believe that one key to describing it is to start from normal currency, and to then describe Bitcoin in relation to that, rather than trying to describe it as a standalone phenomenon. I'm no Bitcoin expert, so this is still a work-in-progress (Warning!), but next time granny asks you, here's a rough-and-ready way you might lay down the foundations (I've deliberately included a lot of repetition, because that's important when learning).

1) Start from physical cash
We all have a basic understanding of physical bank notes. We know that we can store a banknote in our wallet, and then exchange it directly with someone else for goods or services. We can do this because we collectively believe the note to have value, anchored as it is within an immensely powerful cultural system which gives it such value, and further reinforced by our belief in the central banks that issue it, and the governments that accept it for tax.

2) Now contrast physical cash with electronic bank money
Most of our transactions though, are with electronic money. That's the money you see when you log into your online banking account, and that you can use to make electronic payments (if you granny doesn't do internet banking, talk about the numbers on the ATM screen). Where is that electronic money stored? It's not like I have a wallet that has electronic cash in it that I can take out and give to someone. All our electronic money is actually stored in the IT systems of commercial banks.

3) Point out that electronic money is just a number in a bank's computer, attached to your account ID
DATACENTRE: WHERE YOUR E-MONEY IS STORED
To 'store' your electronic money, all the bank really does is maintain an internal ledger, which is a list that says "Brett has deposited X amount into the bank, and he has received X amount in payments, and he has withdrawn X amount from ATMs, and has paid X amount to other people via electronic payments, and this is how much he has left." And that's the amount you see on your bank statement. Your current bank balance is thus the product of a series of transactions over time that the bank validates and records.

4) Then point out that I cannot hold this electronic money in my own computer
If I had to call Co-Operative Bank up and say, "I have £350 in my account with you. It's currently in electronic form. I'd like to take it out of the bank. Please can you transfer it to me in electronic form, so that I can store it directly on my computer", they'd laugh at me. They'd just say "Sorry Mr. Scott, it's just numbers recorded next to your account ID. We can convert it into cash and give that to you if you come into a branch, but we cannot give it to you in electronic form, unless you could specify another bank where you have another account."

5) And point out that banks are thus intermediaries that 'keep score' of e-money
When we make electronic payments with electronic money, what actually happens is that we send a message to our bank to transfer money to someone else's bank. Your bank then records on its ledger that money associated with your account ID is no longer associated with it (has 'left your acccount'), and the other person's bank records that the money can now be associated with the recipient's account (Later the two banks clear it with each other via their reserve accounts at the central bank if necessary). The important point  is that I never personally send the electronic money to the recipient and they never personally receive it - intermediaries do it on our behalf.

Thus, unlike a physical bank note, there is no 'independent existence' of electronic money. With cash, I could hoard it in a suitcase and count it myself, and show it to other people who agreed it was real. For electronic money to be real though, we rely on a bank to say "yes, Brett originally had £400 in here, and then someone sent him £50, and now he has £450, and then he sent £100 to someone, and now he has £350." We rely on the intermediary to maintain accurate 'score' of our electronic money on its ledger so that I can look on my statement and see an amount I apparently have.

6) Bring up the issue of double-spending of e-money, and how banks prevent it
Let's say my current electronic money balance in my bank account is £15. If I went onto Amazon and spent that on an awesome financial activism book, and then 5 seconds later tried to spend the same £15 on second-hand shoes from Gumtree, that would be an attempt to double-spend electronic money. My bank though, would quickly clock on to the fact that on their internal ledger I only have £15, and that the latter attempted Gumtree payment is thus invalid, at which point they'd reject or reverse it. Thus, there is a 'time-based priority system' in which the first payment is the legitimate one, and can be validated, and the latter is illegitimate, and will not be validated. Only bank intermediaries have the birds-eye view to mediate attempted electronic payments by 'timestamping' them, like a clerk saying "this payment came first, and then this one, but only the first one is valid, because the account does not have a high enough score to complete the second payment".

7) Point out that a trusted intermediary is thus required in order to maintain 'realness' of electronic money
Imagine HSBC could hypothetically find a way to transfer you money in electronic form, so that you personally could store it on your computer. What would that money be? Presumably it would be some type of computer file, but if it was just a computer file, what would there be to stop you just copying and pasting it many times to replicate it? It would be akin to being able to counterfeit money very easily and rapidly. If we were willy-nilly allowed to copy and paste our own electronic money, there would be widespread breakdown in trust in it. If you knew that people kept their electronic money on their own computers, would you trust a payment that came from them, or would you think that maybe they were just creating it whenever they felt like paying someone?

A physical banknote has an identity number, and the mint is supposed to maintain 'realness' of the money by validating each bank note as a real one. With electronic money though, we have to trust in the banking system in order to trust in the money. If we believed that Barclays could randomly change the ledger and type in random amounts of money into people's accounts, we wouldn't trust people's bank balances. Banks maintain 'realness' of electronic currency by convincing us that it's basically the same as physical currency, only much more convenient, and that they keep valid score of it on our behalf. (Let's leave aside the complexities of fractional reserve banking for now).

8) You've now set up the Holy Grail question: Is it possible to create a version of electronic money that, like physical cash, does not require a central intermediary?
Turn to gran and say "So while it's true that I can send cash in an envelope to someone in Hong Kong, how could I do the same with electronic currency without having banks acting as central intermediaries in the process?" Gran ain't stupid, and she knows where you're going with this. She yells "Ta da, enter Bitcoin!"




9) Leap up and shout "Yes Granny, what is required is a decentralised intermediary!"
Let's cut straight to the chase. Bitcoin is a system to replace a centralised banking intermediary (that we have to trust to accurately record electronic money transactions), with a decentralised intermediary that we don't have to trust. That decentralised intermediary is a network of Bitcoin users.

10) Start from a hypothetical bitcoin payment. Explain that I must do a 'shout out' to the Bitcoin network, asking  them to validate, and then record, the transaction
Ignore for a moment how the bitcoins enter circulation, and go straight into describing a transaction. In an ordinary bank-mediated electronic payment, you'd say "I want to pay £25 from my Co-Operative Bank account to Mr. Jones' HSBC bank account, please transfer the money" and the two banks involved would record it on their ledger, first checking to see if you actually had enough to pay that, leaving you with a residual amount in your account. Let's now imagine you have 3 bitcoins (ignore for a moment where they are stored). It's like having a positive balance in your normal bank account. In the Bitcoin system, there are no people's names, there are only numbered addresses, called Public Keys. This is just an identification number, and any bitcoins in the system are attached to (or belong to) particular public keys, which in turn belong to actual people. If I want to spend bitcoins, I must first broadcast an electronic message to the Bitcoin network saying something roughly like:
  • "Hello I am Public Key 191Zh2XUc54EMNZcbkchVfApNQrBjL4Zb3
  • I wish to transfer 1 Bitcoin to Public Key 1M9fzriM7DgxDfGEhKqD2takTkXziqPkYF
  • Please check this and record it on the ledger".

11) Explain what the ledger is
But wait, what is this ledger? In an ordinary bank, the ledger they record your transactions onto is an internal list, almost like an excel spreadsheet. Take a look at your printed bank statement: It starts with an Opening Balance, then lists a bunch of transactions, and then ends with a Closing Balance. Commercial banks hold millions of these ledgers to record the history of money in each account. Now imagine all those were melded into one giant interconnected ledger showing all transactions that had ever occurred between users of a particular electronic currency. In the case of Bitcoin, this ledger is called the Blockchain. It is just a computer file that gets constantly updated, and it is held on the computers of everyone in the Bitcoin network.

12) And explain that it is built and maintained by a network of 'clerks' called Miners
As proposed transactions (like the one in No.10 above) are broadcast, the Bitcoin network collects them them into neat cohorts called blocks (a block of transactions), which are (figuratively speaking) dropped onto the virtual desk of a decentralised network of clerks who go about checking that they are legitimate (picture a decentralised version of a giant room of clerks receiving big dumps of transaction slips to process). This is called 'mining'.

13) If granny asks "Why's it called mining rather than checking", you say:
Perhaps the most elegant aspect of Bitcoin is that to reward people for the arduous task of validating and recording transactions in Bitcoin, they can get rewarded with new Bitcoins. The system is built such that you mine new bitcoins by checking that old bitcoin transactions are legitimate, and it's thus a currency that grows in the process of people trying to maintain its integrity. Moreover, the people in the network actually compete to validate the transactions, lured by the prospect of being rewarded with new bitcoins. So unlike a single central intermediary, where all clerks would be theoretically just be paid salaries to do the drudge work, this is a decentralised intermediary made up of competing mercenary-like clerks, paid only if they succeed.

You can see this process in action at http://blockchain.info:
  • If you look at the bottom of the webpage, you'll see the latest transactions that are being broadcast to the network. If you click on one of them, you'll see they are unconfirmed (i.e. transactions waiting to be validated by the 'clerks')
  • If you look at the top of the page, you'll see the latest blocks of transactions that have been confirmed, each with an ID number, and the number of transactions contained within it (e.g. Block 232412 contains 165 transactions and was confirmed by BTC Guild, a mercenary group of collaborating miners. You can also see that they've been awarded with 25 new bitcoins as a reward for validating the block)
  • On average it takes 10 minutes for new transactions to be validated and included into a block. This means that if you make a bitcoin payment, you'll have to wait for a little while before the payment is confirmed and embedded into the blockchain record

14) Granny looks puzzled. She asks "but how do these miners/clerks check the transactions and why is it so arduous that they have to be rewarded with new bitcoins to incentivise them?"
"GRAN, ARE YOU FOLLOWING?"
Yeah, this is where it gets a bit more complex. You want to convey the basic point that the validation process has to be difficult enough that no renegade power group (like the CIA for example) could game the system, but this is also where some of the more advanced cryptography comes in. Even if you understand the cryptography, it's probably unnecessary to explain it in any depth to your grandmother. If she wants to know more, refer her to the original document by Satoshi Nakomoto, and perhaps to this useful paper from Stanford. Just reiterate that as the transaction 'shout-outs' (described in No.10) are received by the network, the miners/clerks must exert a lot of computing power into checking that the people attempting to make payments have enough bitcoins credits to do so (by checking the existing ledger of transactions) and must then update the ledger with these new payments (kind of like saying "OK, it appears your opening balance was this, and you are indeed able to spend this amount of bitcoins, so we'll add the transaction to the blockchain, and now your closing balance is this"). Reiterate that the transactions are validated in groups called blocks, and that when the validation is complete, the block is then added to the blockchain (chain of blocks strung together = blockchain).

15) Which leads to the obvious point that the blockchain thus gets longer over time
The blockchain, being a historical record of all the transactions accepted by the community, thus gets bigger as the transactions go on. Check out a visual representation of its increasing size here.

16) Now the key point to put it all together: The Blockchain is a historical list of transactions, and  is thus also the list of outstanding coins
This is the piece that most trips me up. It seems counterproductive to think of bitcoins as 'things', as if they were like metal coins. The only obvious 'things' in the Bitcoin world are the blockchain and peoples' public key IDs. A bitcoin payment, and the resulting shift in the balances associated with two bitcoin IDs, has 'happened' only once it is recorded on the blockchain by network members that are mining. In other words, it's not like the transaction first occurs and is then later recorded (a bit like me giving someone cash and then later recording it). It is in fact the very act of recording that changes the coin balances, or makes the transaction real.

Payment is thus an act of public recording, not an act of private giving. Using this system, I am able to pay someone in Spain using a simple internet connection to give an electronic shout-out to a public network. After 10 minutes or so the recipient will see the changes reflected in the blockchain, and voila they have received their bitcoins from you.

Thus, my 'coins' actually reside in, or are implied in, the historical record of the blockchain. The blockchain started from the very first 'genesis block' (Block No.0) created by Satoshi Nakomoto, and has since then recorded the creation of new coins, and which public key they belong to. It is a collaboratively-built knowledge bank that holds the record of the amounts each public key has received and spent, and thereby how many coins can be attributed to each public key. Much like your current bank balance is merely the result of the bank having a centralised ledger to record transactions in and out of the account, your bitcoin balance is merely the residual product of changes recorded in the decentralised blockchain ledger. All I have on my computer is a public key which says that I am the rightful owner to a part of that history. My public key is like the key to a virtual, decentralised safe-deposit box facility, and if I lose access to it, I lose access to my claims to the coins attributable to my public key in the blockchain.

17) Some final musings: In what way is Bitcoin peer-to-peer?
People frequently call Bitcoin a peer-to-peer electronic currency, which could easily imply that you could send bitcoins directly to someone else with no third party involved. As you can see though, there is a third party involved. It's just that the third party is a decentralised network of people rather than a single centralised institution like a bank. It is 'peer-to-peer' in the sense of being a payment system under the control of no single institution, but it involves more than just two parties to a transaction.

"SO THEN THE CLERKS PROCESS THE BLOCKS..."
Sorry gran
Ok, so that's the opening gist of it, and I'm really not sure how many grandmothers would understand this. Even if they did though, the first question that would pop into their wise heads is "Ok my dear, it's all very well to have a clever system like this to validate transactions undertaken in this currency, but you still haven't explained why Bitcoin has value." Right on Gran. That's a much more subtle question entirely. I have my theories about that, and particularly about the quasi-mystical underground hype that initially gave Bitcoin value (see the section called 'The mojo of Nakamoto). If I were you, I'd take a seat and listen to the words of warning your gran may have. Bitcoin indeed is pretty amazing, but it has also attracted a lot of hype from a lot of ideologues. I'd recommend ignoring them and taking time to think clearly about this yourself.

End Note: This is an ongoing Wiki Project
As mentioned at the beginning, I'm not a Bitcoin expert and this is still a work in progress. My main concern is how to find clear ways to explain things in intuitive ways to people. If you have ideas for how I can do so more accurately and effectively, please let me know!

Sunday, April 21, 2013

Personal Income Tax for YA2012


Finance Malaysia hopes this article doesn't come late to give you some info on Personal Income Tax filling for year of assessment 2012. Maybe due to the general election, which had diverts our attention lately. Lol. Anyway, do remember to file your income tax before 30th April oh!!!

Well, here is the list of Personal Tax Relief for YA2012. And, I would like to highlight to you, in RED color words, some changes/differences from previous year.

Personal Tax Relief for YA2012
  • Item No.11:
    This would replace Item 10 from YA2012-YA2017 with higher amount of RM6,000
  • Item No.23:
    Private Retirement Scheme (PRS) is the NEW item which can help you reduce tax further with additional RM3,000 tax relief from YA2012-YA2021. As such, Item No.22 would be replaced until after YA2021.
All other items remained the same. Do reduce your tax payable by maximizing the tax relief amount. Remember to keep a record and file it properly. Happy tax filling. Thanks.

Blue color: Tax relief that we can adjust easily in our daily life
Green color: Tax relief for property not rented out with S&P signed between 10/03/09-31/12/10
Light red color: Tax relief related to child
Yellow color: Tax relief related to life insurance premium

Tuesday, April 16, 2013

Consolidating Credit Card Debt: 2 Easy Methods in Malaysia


Credit cards have become a part of life in Malaysia. But as much as they make life a lot more convenient; credit cards can also lead to an unmanageable amount of debt. In some cases, credit cards have even led to bankruptcies.


If you have a credit card debt that seems to be spiralling of control, it may be the right time to consider debt consolidation. In Malaysia, there are two common debt consolidation methods that are highly workable.

1) Credit Card Balance Transfer

Credit Card Balance Transfers involve the transferring of money that you owe on your current credit card account to a new credit card.

Balance transfers offer a number of different benefits, including lower interest rate and the ability to simplify your credit card debt payment process. 

How Credit Card Balance Transfers Can Work for Debt Consolidation:

     If you have accumulated a significant amount of credit card debt, there is a good chance you are currently being charged the maximum interest rate. Based on the tiered interest rate structure adopted by banks in Malaysia, this maximum rate is generally 17.5% p.a.
     If you are paying the maximum interest rate, you are probably finding it quite difficult to keep up with your credit card debts. High interest rates can cause your credit card balance to rise quickly. For example, if the amount you owe on your credit cards is RM10,000, you are essentially adding RM146 in interest to your debt each month.
     A credit card balance transfer could give you a break from paying high interest. In some cases, you'll find balance transfer programmes that offer zero interest rate, at least for the first year or so. By taking advantage of one of these offers, you will have a better chance of paying your debt off.
     Banks often charge a once-off fee of 3% when transferring a credit card balance. However, in the long run you will still end up paying less, due to the lower interest rate.

Example of How Much You Could Save:

Credit card average maximum interest rate = 17.5%
Lowest known interest rate for balance transfer (for a limited time) = 0%
Amount you could potentially save on interest (for a limited time) = 17.5%

2) Personal Loan

The concept of taking out a personal loan in order to pay off credit card debts might sound a little unusual. However, if you take a strategic approach by taking advantage of interest rate differences between personal loans and credit cards, this method can actually work quite well.

How Personal Loans Can Work for Debt Consolidation:

     If you have accumulated a significant amount of credit card debt, there is a good chance you are currently being charged the maximum interest rate. Based on the tiered interest rate structure adopted by banks in Malaysia, this maximum rate is generally 17.5% p.a.
     The interest rates on many personal loans are far lower than credit card maximum interest rates. For example, some personal loan interest rates in 2013 can be 9.88% p.a. or less, depending on your loan amount and term. If you are a government servant, the rate dives even lower.
     If you take up a personal loan with significantly lower interest than a credit card’s, you could technically be paying much less over the long run. The savings you’re getting from your interest could even help offset the charges and fees associated with the application for a personal loan.

Example of How Much You Could Save:

Credit card average maximum interest rate = 17.5%
Known interest rate on a personal loan = 9.88%
Amount you could potentially save on interest = 7.62%

This article is brought to you by iMoney.my - the first website in Malaysia comparing credit cards, loans and mortgages - free of charge and independently.

Friday, April 5, 2013

The age of turbulence – credit derivatives style



My working paper The age of turbulence – credit derivatives style is now about to be published (forthcoming in Global Business and Finance Review). It can be found on the S-WoPEc web page here. In this paper I focus on the extreme behavior of the credit default swap market during the crisis (see the figure). The number of extreme price changes in the time period 2007-2010 is truly extreme and so is the size of the most extreme of these extremes...

As a result, anyone who wants to model the time series properties of credit default swaps in the future will run into trouble due to the structural break in June 2007. Before the crisis, the pre-crisis regime, the market was as tranquil as it was volatile in the later crisis regime. The problem is of course particularly critical since the history of the credit derivatives universe is split quite equally between the tranquil and the volatile regime; as you are well aware of, the market has only existed in ten years or so. In other words, you cannot just sweep the crisis years under the carpet! This is of course a problem not only for researchers but also for risk managers in banks and hedge funds that trade in credit derivatives. Good Luck!

Monday, April 1, 2013

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


WELCOME TO OUR TREASURY: HERE BE DRAGONS

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".

I SEEK LONDON!
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.