Yesterday, Wall Street traders feverishly passed around a note that without a shred of evidence claimed "that Risk Parity has blown up" (one hardly needs to be a trading wizard to figure that out after reading our post on how "the biggest VaR shock in history" has forced liquidations among risk-parity funds), and that furthermore macro funds as Bridgewater, and pod-based multi-strats such as Citadel and Millennium are on the verge of collapse. The reason why we did not publish this note is because it was made up, with the author pulling bits and pieces of fact, folklore and outright fabrication in hopes of making an exciting narrative (in that regard, he succeeded).

What is going on, is that while Bridgewater has tumbled 20% YTD (as we reported this weekend) and its risk-parity fund is certainly massively deleveraging, it is quite viable. Meanwhile, even as Citadel is hurting on its long/short funds, it is making money hand over first in its trading division while its HFT groups continue to print money. As for Millennium, which gained 0.75% in the first two months of the year, it was down a very modest 2.67% this month through to March 12, according to the FT.  To anyone who has worked at Millennium, this will not come as a surprise: not only does derivatives-wizard Englander make the rounds across all his trading pods day in and out P&L in hand, but Millennium's risk management back office is legendary in the tight leash they have all their traders on. As such the probability of a massive blow up at the 666 Fifth based fund is virtually nil, absent a roughly 12-sigma VaR shock which would probably wipe out most of Wall Street.

That said, not even Millennium is immune from the market shocks taking place now, and according to the FT, the macro fund was forced to close several of its pods run by teams of traders in response to the recent unprecedented market moves which have resulted in substantial (but manageable) losses at the fund.

Putting the Millennium "collapse" in perspective, closures of the so-called "trading pods" at the $40bn multi-strategy firm which runs about 150 to 200 pods have reached double digits, per FT sources. What is left unsaid is that quite a few of the remaining pods were massively short risk assets and have more than made up for the terminal underperformance of their (now former) colleauges.