Are macro funds finally staging a comeback this year?
After posting disappointing numbers in 2012 -- when the average macro-focused hedge fund fell by 0.40 percent, according to Chicago-based industry tracker Hedge Fund Research -- several brand-name managers are posting strong returns this year. Louis Bacon’s New York-based Moore Capital Management, Andrew Law’s New York-based Caxton Associates and Paul Tudor Jones II’s Greenwich, Connecticut-based Tudor Investment Corp. are among the famous macro management firms posting strong returns in 2013.
Experts say successful macro investors this year have correctly bet on the ferocious rally in the Japanese stock market and the decline in the yen. Many have also ridden the rapid run-up in U.S. and other stocks, while others have correctly bet on the decline in many commodities, including precious or industrial metals. Still others went long the Polish zloty while shorting the yen, and others shorted the South African rand or went long natural gas.
The Moore Global Investments fund has gained 9.74 percent year to date and 6.63 percent through early April. Caxton Global Investment Ltd. was up 12.85 percent through May 20 after climbing about 4.5 percent in the first quarter, while the Tudor BVI fund returned 9.52 through May 10 after rising 8.51 percent through April 12.
Over in London, Brevan Howard Asset Management’s BH Macro Fund Ltd. has posted a 10.78 percent gain for the year through May 17, while BlueCrest Capital Management’s BlueTrend Fund Ltd. was up 7.72 percent (BlueTrend Fund LP was up 7 percent) through April after two consecutive years of essentially flat performance.
Part of what hurt macro managers last year were losses in systematic/quantitative CTA strategies, which contributed to losses in the HFR macro index. The HFRI Macro: Systematic Diversified index lost 2.7 percent in 2012, due to weakness in currencies and commodities. According to Atlanta-headquartered industry tracker eVestment, the average macro fund gained 2.92 percent last year, but its composite performance does not include managed futures, which lost money.
The rebound this year among the major macro funds is not a surprise to Alan Howard, co-founder of Brevan Howard, who at the beginning of the year predicted in a letter to investors that 2013 would be a very good year for macro investing. “We’re more optimistic about the opportunity set for macro trading now than we have been for some time,” Howard wrote in a year-end letter for clients of BH Macro Ltd., a closed-end investment company that invests all of its assets in the ordinary shares of the Brevan Howard Master Fund, which had $27.8 billion at year-end.
In April, when the fund rose 3.25 percent, BH Macro said in a monthly report that the fund generated gains across all main asset classes, driven by gains in macro equity trading and in European interest rates trading. It also enjoyed smaller gains in credit trading. The fund did suffer small losses in interest rates volatility trading and in U.S. interest rates trading.
BlueCrest said in a letter to investors that its 2.5 percent gain in April was driven by fixed income, equity and metal sectors, and offset somewhat by exposure to energy, crops and foreign exchange.
The rally this year doesn’t apply to macro funds across the board but rather seems to be restricted to the biggest and most famous funds. According to eVestment, the average macro hedge fund rose a mere 1.40 percent through April.
“I haven’t seen any indication of macro funds staging a comeback as a group,” saysPeter Laurelli, vice president, head of industry research, at eVestment, in an e-mail message. “There have been some larger funds that have performed well this year, but also very large funds underperforming.”
In fact, after macro funds’ underperforming the global markets as well as the average hedge fund for the past two years or so, investor sentiment for the group is beginning to wane. For example, a new comprehensive report fromLondon-based data and research company Preqin shows that macro funds accounted for just 14 percent of new hedge funds in the first quarter of this year, way down from 28 percent in 2012 and 26 percent in 2011.
According to eVestment, macro funds as a group have seen net outflows of capital in April, the year-to-date and trailing 12-month periods. “Investor sentiment towards global macro appears to have finally caught up to the universe’s mediocre aggregate performance,” Laurelli says. “Despite relatively poor returns in 2012, macro funds continued to have net investor inflows during the year, but that incongruity appears to have ended for the time being.”
