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By Nell Mackenzie LONDON (Reuters) -Eisler Capital's decision to close its flagship multi-strategy hedge fund as soaring staff costs eroded trading profit exposes the difficulty London-based funds face when trying to grow rapidly and replicate bigger, entrenched U.S. players, investors and industry insiders say. They warn that flows in the $4 trillion hedge fund sector will increasingly be absorbed by incumbents – likely leaving an industry that runs on public pension and retirement money concentrated in the hands of a few big firms with an outsized impact on financial markets. Eisler said last week that it would shut just four years after it pivoted to try and emulate the kind of business model used by the most renowned U.S. headquartered multi-strategy hedge funds such as Citadel, Balyasny and Millennium Management that trade different strategies under one roof. Crucially, Eisler also changed how it charged investors, adopting a pass-through fee structure, where costs take a bite out of trading returns. At Eisler, this meant that on top of a 15-20% performance fee, investors paid the hedge fund's expenses and compensation costs, an investor document seen by Reuters showed.   Eisler's turnover climbed by over 40% between 2023 and 2024, a Reuters analysis of the hedge fund's publicly reported accounts showed. But its staff costs grew much faster, over 900% in five years, outpacing its ability to retain profit and leaving investors with smaller and smaller net returns.  "Multi-strats strike me as the final frontier…what percentage take of gross profits can we squeeze investors on without losing them?" asked hedge fund investor Harald Berlinicke, CIO of Berlin-based Max-Berlinicke-Erben Family Office. "It's not an easy balancing act to get right for a new kid on the block as the sky-high fees the established players can charge gives them an edge in terms of attracting the right talent."  A representative for Eisler Capital declined to comment. Citadel, Balyasny and Millennium also declined to comment. In its last investor letter in October, Eisler highlighted the burden of compensation costs.  Portfolio managers are the most expensive they have ever been, three recruitment professionals, who wished to remain anonymous, told Reuters. They mentioned direct knowledge of star fund managers hired in New York and London this year on salaries of over $100 million, which can prove costly for investors if not offset by stellar trading returns.  BLAME THE MODEL? Investors in pass-through funds receive less than half of the trading spoils, according to Barclays research. While they may have been content with that when multi-manager funds were outperforming the wider industry, net returns have now fallen just short of peers with fixed charges, Barclays said in a July client note. Pass-through fees have, however, traditionally been too rich for some European pension funds. "In Europe, some of the world’s largest and most prestigious pension funds have stated they prefer to invest in lower net returning managers with lower fees than higher net returning managers with higher fees," said Michael Oliver Weinberg, deputy CIO of a family office and previously at Dutch pension fund manager APG.  London is home to large and well-performing hedge funds, not necessarily all multi-strats but still successful, including Rokos Capital Management and Marshall Wace.   The partial pass-through model, seen with Man Group's 1783 Strategies fund, operates as a product included in a wider group of funds, some with lower fees.  Man Group, Rokos Capital Management and Marshall Wace declined to comment.  Berlinicke said that while some investors may give established pass-through funds the benefit of the doubt, that might not be true for newer entrants given the level of the fees.  Meanwhile, one effect of the growing sway of multi-strategy funds was that stock price swings on earnings days in 2024 were the largest since at least 2016, a Reuters analysis showed.  NEW YORK, NEW YORK  New York has been the centre of the multi-manager model with pass-through fees and that won't change, investors said.  London, the second largest hedge fund centre, has 171 hedge fund managers, compared to 911 in New York, a city which has accounted for roughly 85% of hedge funds consistently for the last five years, data from hedge fund research firm PivotalPath shows.  Other centres such as Dubai and Abu Dhabi are also emerging as rivals.  "Crowding in markets has always been something to watch out for," said Berlinicke. "The question is whether large players grow and will that be a problem for markets? Possibly, if they dominate strategies or certain parts of the market."  (Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Kirsten Donovan)

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LONDON/NEW YORK (Reuters) -U.S. President Donald Trump on Friday said he is calculating a massive increase in tariffs on Chinese imports, adding there was no reason to meet with President Xi JinPing in two weeks as planned, triggering a sell-off in the dollar.  China this week has tightened restrictions on exports of key rare earth materials and, separately, on Friday said it would impose extra port fees on U.S. ships from October 14. MARKET REACTION: STOCKS: US stocks fell sharply after Trump's comments on China.. S&P 500 down 1.6% while Nasdaq sank 2.2% BONDS: U.S. Treasury yields fell, with the yield on the benchmark U.S. 10-year note down 9 basis points at 4.059%. FOREX: The dollar index dropped 0.5% to 98.87. COMMENTS:  JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON: “It sends a message of negativity. What markets, for the most part, and investors need is a little bit clearer guidance, especially when trying to figure out if the Federal Reserve is going to deliver what they want, which is 50 basis points slashed off the interest rate for the remainder of the year.” “It brings, once again, to the table and to the spotlight that the United States is acting unilaterally to try to align trade and to try to get countries to align with trade. So ultimately, it does create a lot of negativity for the U.S. economy. It creates doubt about, where is this all going? What is the purpose? Is China really going to have to be very retaliatory moving forward in order to get the United States to negotiate better? So it creates a lot of doubt.” CHRIS SCICLUNA, HEAD OF RESEARCH, DAIWA CAPITAL MARKETS, LONDON: “It’s difficult to know how to respond to this (the Trump comments). The temptation, given what’s happened since the start of the year and the resilience of markets, is to fade these announcements and take this with a pinch of salt what he’s saying. We’ll have to see what the substance is.” BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN: "It’s fuel on the fire. For a while it looked like things were going well between Trump and Xi, but China’s latest export controls on rare earth minerals set Trump off. A lot can happen between now and the APEC summit where they were supposed to meet, so it wouldn’t be surprising to see tempers cool before then. STEVE SOSNICK, CHIEF MARKET ANALYST, INTERACTIVE BROKERS, CONNECTICUT: "The president's comments are not are obviously not helpful for the market. We finally got through the worst of the tariff concerns and now we find ourselves once again faced with another round of them and the tone of his comments was certainly quite aggressive – massive tariffs being threatened and no reason to talk to him (Xi). So this is definitely going in the wrong direction about U.S. China trade relations. It's definitely not a market friendly move and considering how quickly the market is selling off on this." ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, CONNECTICUT: "He's (Trump's) caught the market off guard again and thrown more question marks into a market that is being questioned about a very high degree of enthusiasm and being sort of scrutinized for having too much fluff built into it. Then Trump comes out with this surprise announcement, so you have a market that hit an air pocket and is selling off a little bit. When you reacted to it in the past, it's come back and burned you. Do you sell out of this market because of this? It's a giant question mark. It just creates more questions and volatility in the market." MIKE BROWN, SENIOR RESEARCH STRATEGIST,  PEPPERSTONE, LONDON: "It’s a bolt from the blue from Trump and after the rare earth news earlier … the timing is a big surprise. I would say as always with Trump and I think the market has learned this now, it’s difficult to determine what is the bluster and rhetoric and what he might follow through on. The key thing market participants will be focused on as we move into the weekend and next week, is: are we now looking at having to tear up the assumptions we did have that trade was a done deal and now look at a re-escalation of tensions between the two. If we are, and talks are in jeopardy, you are looking at a fairly chunky leg lower in risk in the days and weeks ahead." (Reporting by EMEA, New York Markets Teams; Compiled by Amanda Cooper; Editing by Dhara Ranasinghe)

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FRANKFURT (Reuters) -BASF has agreed to sell a majority stake in its coatings business to private equity firm Carlyle and the Qatar Investment Authority, valuing the unit at 7.7 billion euros ($8.91 billion). In a joint statement, the companies said on Friday that BASF would retain a 40% stake in the coatings business and that it would also receive a pre-tax cash inflow of about 5.8 billion euros on completion of the transaction. BASF put the coatings division up for sale at the start of the year, part of a wider strategy to focus on businesses that are closely integrated and physically connected within its major chemical plants across the globe. BASF said that the transaction – when combined with the sale earlier this year of its decorative paints business to Sherwin-Williams – values BASF’s entire coatings division at an enterprise value including debt of 8.7 billion euros, or about 13 times 2024 earnings before interest, tax, depreciation and amortisation (EBITDA). The chemical company started approaching the market in the second quarter to explore strategic options for its remaining coatings activities, and was targeting a decision in the last quarter of the year. It has said proceeds from a potential divestment could enable an earlier start to a previously announced share buyback of at least 4 billion euros between 2027 and 2028. ($1 = 0.8642 euros) (Reporting by Ludwig Burger, Editing by Friederike Heine, Kirsten Donovan)

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(Reuters) – Wall Street's main indexes fell on Friday, erasing earlier gains, after U.S. President Donald Trump said he was weighing a "massive increase" in tariffs on Chinese goods. At 11:12 a.m. ET, the Dow Jones Industrial Average fell 201.88 points, or 0.44%, to 46,156.54. The S&P 500 lost 43.06 points, or 0.64%, to 6,692.05 and the Nasdaq Composite lost 223.54 points, or 0.97%, to 22,801.09. (Reporting by Niket Nishant in Bengaluru; Editing by Shilpi Majumdar)

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BEIJING (Reuters) -Vessels owned or operated by U.S. firms and individuals, or those built in the United States or that fly the U.S. flag, will be charged additional port fees per voyage starting on Tuesday, China's transport ministry said.  The fees are a countermeasure against upcoming U.S. port fees on Chinese ships, the ministry said on Friday.  Also starting on October 14, ships built in China – or operated or owned by Chinese entities – will need to pay a fee at their first port of call in the United States. Fees could top $1 million for a ship carrying more than 10,000 containers, and could rise annually through 2028, according to analyst estimates. Vessels owned or operated by a Chinese entity will face a flat fee of $80 per net tonnage per voyage to the U.S.  CHINA CALLS U.S. FEES DISCRIMINATORY The U.S. fees on China-linked vessels, following a probe by the U.S. Trade Representative, are part of a broader U.S. effort to revive domestic shipbuilding and blunt China's naval and commercial shipping power. "It is clearly discriminatory and severely damages the legitimate interests of China's shipping industry, seriously disrupts the stability of the global supply chain, and seriously undermines the international economic and trade order," the Chinese ministry said.  Over the past two decades, China has catapulted itself to the No. 1 position in the shipbuilding world, with its biggest shipyards handling both commercial and military projects. The Chinese fees on U.S. vessels could hurt the U.S. less than the U.S. fees might harm the legion of Chinese ships.  The fees announced by China, like those put in place by the U.S., "add further complexity and cost to the global network that keeps goods moving and economies connected, and risk harming their exporters, producers, and consumers at a time when global trade is already under pressure," said Joe Kramek, president and CEO of the World Shipping Association. Last year, Chinese shipyards built more than 1,000 commercial vessels, while the U.S. constructed fewer than 10, according to military and industry analysts. RATES RISE OVER THREE YEARS For U.S. vessels berthing at Chinese ports from October 14, the rate will be 400 yuan ($56.13) per net tonne, the Chinese transport ministry said. That will increase to 640 yuan ($89.81) from April 17, 2026, and to 880 yuan ($123.52) from April 17, 2027.  For vessels calling at Chinese ports from April 17, 2028, the charge will be 1,120 yuan ($157.16) per net tonne. Tensions between China and the United States have started to deepen since September, with the two superpowers looking to be struggling to move beyond their current trade tariff truce – a 90-day pause from August 11 that ends around November 9.  Retaliatory tariffs in the U.S.-China trade war this year have sharply curtailed Chinese imports of U.S. agriculture and energy products. "There is not much impact likely on agriculture trade, but this step goes to show that China is still irritated with U.S. and they are not going to allow U.S. agricultural imports anytime soon," said one oilseed trader at an international company, which sells soybeans to China.  "You don't take such steps if you're trying to resolve matters. Chinese crushers might have to do without U.S. beans this year."  U.S. President Donald Trump and Chinese leader Xi Jinping are expected to meet as they attend Asia-Pacific Economic Cooperation (APEC) meetings in South Korea at the end of this month.  ($1 = 7.1241 Chinese yuan renminbi) (Reporting by Ryan Woo in Beijing and Naveen Thukral in Singapore, additional reporting by Jonathan Saul in London; Editing by Kim Coghill, Kate Mayberry, Rod Nickel)

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BRASILIA (Reuters) -Brazil's government unveiled a new real estate funding model on Friday that will eliminate mandatory reserve requirements at the central bank tied to savings accounts starting in January 2027. Until then, banks will continue to allocate 65% of savings deposits to housing loans, as currently required, the government said in a statement, but will be able to reduce compulsory deposits. (Reporting by Marcela Ayres; Editing by Mark Porter)

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By Marianna Parraga HOUSTON (Reuters) -Toronto-listed Gold Reserve said on Friday it has filed motions to disqualify a court officer and the judge overseeing an auction of shares in the parent of Venezuela-owned Citgo Petroleum, as well as two firms advising the Delaware court. The miner has been trying to prevent the court from declaring a $5.9 billion bid by rival Amber Energy, an affiliate of hedge fund Elliott Investment Management, as the auction's winner since its own $7.9 billion bid was not recommended in August. Gold Reserve is one of 15 creditors lining up to cash proceeds from the auction of shares in PDV Holding, a unit of Venezuelan state oil company PDVSA, as compensation for debt defaults and expropriations in Venezuela. GOLD RESERVE ALLEGES CONFLICTS OF INTEREST Gold Reserve has also requested a temporary stay of all decisions concerning any bids submitted in the sale process pending resolution of its disqualification motion. "Gold Reserve is seeking full transparency on these issues for its shareholders," it said in a release. The company is seeking to disqualify the Delaware judge overseeing the case, Leonard Stark, as well as court officer Robert Pincus, who switched his recommendation of the auction's winner to Elliott's Amber from Gold Reserve. Reuters could not immediately reach Stark for comment. A counsel for Pincus did not immediately respond to a request for comment. Lawyers representing Venezuela had requested in September the suspension of an important sale hearing due to an alleged conflict of interest involving advising firm Weil, Gotshal & Manges. But Stark denied the motion. Gold Reserve is now requesting Weil be disqualified over an allegation it had been representing Elliott while the Citgo sale process was ongoing. The miner also said that Weil and Evercore, which is helping the court evaluate the bids, have ongoing relationships with some bondholders that could receive auction proceeds under Elliott's bid. Weil and Evercore did not immediately reply to requests for comment. The motions were filed under seal on Thursday, with the Venezuelan parties also filing motions to disqualify Pincus, Weil and Evercore. Judge Stark has set a court hearing for October 21 to listen to the parties over the conflicts that have emerged since Pincus switched his recommendation. He is expected to issue a final ruling on the winner after that. (Reporting by Marianna Parraga; Editing by Mark Potter and Joe Bavier)

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(Reuters) -A group of banks including Bank of America , Citi, Deutsche Bank, Goldman Sachs and UBS will work together to explore creating blockchain-based assets pegged to G7 currencies, the banks said in a press release on Friday. (Reporting by Tommy Reggiori Wilkes and Elizabeth Howcroft)

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(Reuters) -Levi Strauss & Co shares fell about 9% on Friday as investors focused on the denim maker's warning of a tariff-related hit to its fourth-quarter margin, overlooking a higher annual profit forecast. The margin-hit forecast highlights the impact of the Trump administration's changing trade policies on consumer-facing companies, especially those with suppliers in countries that do not have trade deals with Washington in place yet. Levi's has capitalized on the resurgence of baggy, loose-fit apparel among Gen Z customers and raised its 2025 sales and profit forecasts on Thursday, but the company still warned of a 130-basis-point hit to its fourth-quarter gross margins. "While management calls this (growing expenses) transitory, the concern is that Levi's has struggled to show an ability to scale expenses for 3-5 years now, thus creating lower levels of visibility into 2026 margin," Ike Boruchow, equity analyst at Wells Fargo, said. The company sources the bulk of its products from South Asia, including Bangladesh, Cambodia and Pakistan – countries that face high tariffs currently. Wall Street analysts called the forecast "conservative," with Barclays analysts saying that the lackluster forecast came in despite the company not seeing any adverse changes in shopping trends in September. Trump's trade policies have also pressured the margins of other retailers such as Ralph Lauren, Abercrombie & Fitch and Coach handbag owner Tapestry. However, companies that cater to more affluent customers face less burden as they can pass on the higher costs to the consumer.  Levi's has secured about 70% of its holiday inventory early and slightly raised prices to mitigate tariff impact and prepare for the holiday quarter, executives said in a post-earnings call. It has also broadened its product offerings, leaned into full-price sales and kept a tight leash on inventory to offset weaker consumer sentiment and tariff-related pressures. This has helped the company's stock to climb about 40% so far this year. Its forward price-to-earnings multiple, a common benchmark for valuing companies, is 16.94, compared with Ralph Lauren's 20.59, Abercrombie's 7.48 and American Eagle Outfitters' 11.38. (Reporting by Kanchana Chakravarty and Prerna Bedi in Bengaluru; Editing by Janane Venkatraman and Shinjini Ganguli)

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By Marc Jones LONDON (Reuters) -Breathless markets had little time for a break on Friday as record-setting stocks dipped, gold shone bright still and the dollar headed for its best week of the year despite more drama for the Japanese yen and in Europe. With the ink still drying on a historic ceasefire between Israel and Hamas, the political developments were still coming thick and fast – and continuing to move markets. Wall Street was set to tick higher despite the ongoing government shutdown there, but Japan's yen has been jolted out of its recent slide by the Komeito party quitting its coalition with the Liberal Democratic Party. [/FRX] That raises questions over the route to the premiership for new LDP leader Sanae Takaichi, whose pledges of fiscal stimulus and calls for the Bank of Japan to hold off on interest rate hikes had sapped the yen and lifted the Nikkei 6% until a 1% drop on Friday. [.T] "If Takaichi doesn't become prime minister, or at least can't govern effectively, you don't really have much of a 'Takaichi trade'," said Chris Scicluna, head of research at Daiwa Capital Markets Europe. Major European bourses also saw a low-key end to the week [.EU] as traders waited to see whether France's President Emmanuel Macron can find a way out of his country's political crisis. He is expected to name his sixth prime minister in less than two years later, with that person facing the vexing mission of steering a belt-tightening budget through a deeply fragmented parliament. The pan-European STOXX 600 was steady at 571 points, heading for a third straight weekly gain. The CAC 40 in Paris though is down on the week and the euro is set for its worst seven days since July. [/FRX] The yield gap between 10-year French government bonds and uber-safe German Bunds — a market gauge of the risk premium investors demand to hold French debt — was also back at 80 bps having surged to 88 bps earlier in the week. "At the moment the market is happy," Daiwa's Scicluna said, referring to the prospect of the French crisis easing. "Next year could well be another very different situation though," he added, referring to the possibility of it all falling apart again. "Spreads could break out to the highest levels since Mario Draghi's 'Whatever it takes' speech," he said, speaking about the former ECB President's 2012 pledge that eased the debt crisis.  RARE EARTH CURBS U.S. stocks were set to open fractionally higher with consumer sentiment data due shortly and the all-important third-quarter corporate earnings season due to kick off next week.  The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was nudging lower due to the yen's bounce on the day, but it remained firmly on course for a 1.6% weekly rise, its best since November. Latin America's markets were set to remain squarely in focus too after the U.S. confirmed it would provide budget chainsaw-wielding Javier Milei's Argentine government a $20 billion swap line to try to quash renewed currency market problems there. "It's unclear what the U.S. will demand in exchange," William Jackson, Chief Emerging Markets Economist at Capital Economics said. Chinese stocks had tumbled 1.4% overnight meanwhile, after Beijing expanded its rare earths export controls on Thursday, tightening control over the sector ahead of talks between Presidents Donald Trump and Xi Jinping.  Beijing also ramped up enforcement of its chip import restrictions, aiming to reduce domestic technology companies' dependence on U.S. products such as Nvidia's artificial intelligence processors, the Financial Times reported on Friday. Reuters could not immediately verify the report. With the U.S. government still in shutdown mode, the yield on the benchmark 10-year Treasury bond fell to 4.09% compared with its U.S. close of 4.14%. Traders expect the Federal Reserve will cut U.S. interest rates again on October 29, with Fed funds futures pricing a 94.6% probability of a 25-basis-point rate cut, according to the CME Group's FedWatch tool. ALL THAT GLITTERS Gold edged back up to $4,000-an-ounce in Europe, having seen a brief bout of selling after topping the threshold for the first time ever this week. Silver, which has risen even more than gold this year, was also back above the $50 mark that it breached for the first time on Thursday. [GOL/] Multiple factors aided the rally, including geopolitical risks, robust central bank buying, exchange-traded fund inflows, expectations of U.S. rate cuts, and trade-related uncertainties. In energy markets, Brent crude slid 0.7% to $64.72 per barrel, after Israel's government ratified a ceasefire with the Palestinian militant group Hamas on Friday, clearing the way to suspend hostilities in Gaza within 24 hours and free Israeli hostages held there in days.      (Additional reporting by Gregor Stuart Hunter in Singapore; Editing by Susan Fenton)

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