Morning Coffee: Most desirable hedge fund offers employees a highly priced gift. JPMorgan deploys its $67m bankers on SpaceX IPO

There is more than one way of making a lot of money when you work for a hedge fund. The second way comes after you have already made money the first way.

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The first way of making considerable money at a hedge fund is to be a portfolio manager whose investment strategies pay off. At this point you will typically receive a bonus based on the percentage of the profits you generated for investors. This percentage was traditionally 20%. However, as funds battle for talent the percentage paid in bonuses has been rising. In 2025, it was nearly 25% at some top multistrategy hedge funds. 

The second way is to reinvest some or all of this bonus in your employer's own funds. This is becoming increasingly common. At Citadel, for example, employees must invest 50% of their bonuses above a certain threshold in the firm's Wellington Fund for three and a half years. 

Reinvesting your bonus can be lucrative. Since its inception in 1990, Citadel's Wellington Fund has generated average returns of nearly 20% a year. Last year, Citadel's Wellington Fund generated only half this amount, but $1m invested over three years would still become $1.35m even at 10% returns. Citadel employees presumably quite like this.

Now quantitative hedge fund DE Shaw is also giving its employees a similar gift, but at a price.

Bloomberg reported yesterday that DE Shaw is starting a special new fund which only its staff will be allowed to invest in. The Financial Times said this new fund will be called Phasor. Phasor will initially trade systematic equities and systematic futures. 

Given that DE Shaw generated returns of over 18% in both 2024 and in 2025, investing your DE Shaw bonus in Phasor could a really great thing. However, it comes at a cost. DE Shaw will be charging its people a management fee of 4.5% to invest in Phasor and a performance fee 45%. If you're an employee who invests $1m in Phasor and it becomes $1.2m, you will need to give back around $99k to DE Shaw in fees. 

That's a lot, particularly given that Citadel merely charges employees investing in its own Wellington Fund a performance fee of 20%, and that 20% is the industry standard. DE Shaw possibly figures that it's been twice as profitable recently and that charging employees 45% is therefore fine. It's also worth noting that since 2022, DE Shaw has also charged outside investors an unusually high performance fee of 30%-40%, and an unusually high management fee of between 2.5% and 3.5%. But still. 

DE Shaw says the new employee fund with its new employee fees is designed to attract and retain talent in an increasingly aggressive hiring market. Instead of grumbling about the fees, employees may want to think only of the Renaissance Technologies Medallion Fund. This has been closed to outside investors since 2005 and has made some RenTech employees very, very rich. 

DE Shaw employees may also want to overlook the fact that as well as creating the new employee fund, DE Shaw is simultaneously restricting withdrawals at its two key funds (Composite and Oculus) so that it will take investors four and three years respectively to get all their money out. Bloomberg says this reflects a "tightening" of liquidity terms across the whole hedge fund industry. It might also suggest that funds see more difficult times ahead. 

Separately, JPMorgan did not spend 20 years wooing Elon Musk and it does not have silver rockets in its lobby like Goldman Sachs for the SpaceX IPO, but it is one of the 23 other banks working on the listing and it's really making the most of that.

Bloomberg reports that both Jamie Dimon and Mary Callahan Erdoes, the CEO and the CEO of its asset and wealth management division, yesterday ran a "live interactive session" for wealth management clients on investing in next week's $1.75 trillion SpaceX IPO. Dimon and Callahan Erdoes are JPMorgan's most expensive people and earn $67m between them. Maybe they will personally donate to help get the one million person Martian colony underway.

Meanwhile...

Goldman Sachs is telling investors it expects revenues from SpaceX's AI business to increase 100 times by 2030. This would mean that Grok's models would have to surpass Anthropic, Google and OpenAI's and is despite the fact that SpaceX's AI business has underperformed rivals to date. (Financial Times) 

Investors in Blackstone's $45bn Bcred Private Credit Fund, attempted to withdraw 10% of assets in Q2. It let them withdraw 5%. (Financial Times)

Cliffwater’s private credit fund aimed at retail clients received 17% redemption requests in Q2 and also limited withdrawals. (Financial Times) 

Partners Group said redemption requests at its US private equity fund for wealthy individuals reached 6% in Q2. (FT) 

Deutsche Bank shares fell as much as 5.4% yesterday after the bank said it's setting aside an extra €100 million ($116 million) to cover non performing loans in Q2. (Bloomberg) 

Schonfeld is opening a Swiss office and it hired Yohan Hwang and Pierre Kling to work there. They were at Millennium. (Bloomberg) 

Mirco Bulega, who left ExodusPoint, is going to Millennium. (Bloomberg) 

London added 67,000 jobs in banking and finance since Brexit. (Bloomberg) 

Citi has got a new chief of staff in the form of Margo Pilic for its 'next phase of our strategy and growth.' Tim Karpoff, its former head of strategy and M&A is leaving the firm after overseeing a period of many job cuts. Karpoff says it was a lot of fun. (Barrons) 

Barclays surveyed 410 buyside investors across North America, EMEA and Asia and only 7% said they're planning meaningful reductions in staff because of AI. (Bloomberg) 

David Solomon is saying densely worded things about the impact of AI on engineering jobs at Goldman Sachs. “You’re going to see nuanced changes that probably to some degree reduce the number of people that we start with over the next few years.” (Bloomberg)  

Bank of America hired 4,000 summer interns and full-time campus recruits this year, split roughly evenly between the two. This was the same as last year. Only 0.8% of applicants were accepted. AI enabled more people to apply. (Business Insider) 

Kirkland & Ellis has agreed a multiyear deal with Palantir to develop its own AI technology. Last year its lawyers received communication training after it was discovered they could be uncooperative. The AI will embed the new “different cultural touch." (Financial Times)  

OpenAI solved a famous maths problem that humans had been unable to solve for a century. It took less than 32 hours and $1k in tokens. (WSJ)

Rob Priestley, a former VP in operational risk management at Deutsche Bank is a barista after making 100 unsuccessful job applications. “I’ve got children to support, financial commitments everywhere, and here I am: unemployed. Who is going to take on a 53-year-old in a fiercely competitive corporate environment?” (Telegraph) 

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