Call it a tale of two macro worlds. In September the average macro hedge fund tracked by Lyxor Asset Management lost nearly 1 percent. As a result, these funds were down 2.8 percent in the third quarter and are now up just 0.7 percent for the year.
“The third quarter was a challenging period for macro managers,” says the just-released third-quarter commentary from Lyxor’s Managed Account Platform research team.
However, for many of the biggest, highest-profile macro hedge fund managers, September either elevated them back into the black or sharply pared their losses and put them in striking distance of profitability. For example, in September, Alan Howard’s London-based BH Macro fund, which invests virtually all its assets in the Brevan Howard Fund, gained 2.93 percent, enabling it to move into the black. It is now up 0.88 percent for the year. It is managed by London-based Brevan Howard Asset Management. Paul Tudor Jones II’s Tudor BVI, managed by Tudor Investment Corp., gained 3.61 percent in September and is now up 1.13 percent for the first nine months. Andrew Law’s Caxton Global Investment, managed by Caxton Associates, surged 3.46 percent last month, cutting its loss for the year to 2.36 percent.
Through September 26 — or with just two trading days remaining — Fortress Investment Group’s Fortress Macro Fund was up 3.16 percent for the month, erasing more than half its loss for the year. It is now down 2.87 percent for the month. Meanwhile, Robert Citrone’s two main macro funds posted very strong results last month, although they too remain in the red for the year. Through September 26, the Discovery Global Macro Fund surged 4.7 percent in September, trimming the loss for the year to 9.81 percent. Discovery Global Opportunity Fund jumped 5 percent in September and is now down just 6.12 percent for the year. The funds are managed by Citrone’s firm, Discovery Capital Management.
Louis Bacon’s funds at Moore Capital Management had more modest months in September. Through September 25, Moore Global Investments, which Bacon personally manages, was up 0.64 percent for the month, and is down 4.31 percent for the year. Moore Macro Managers Fund, which is run by more than a dozen portfolio manager teams, rose 1.31 percent in September and is now up 2.76 percent for the year.
It is not clear which specific trades enabled these managers to reverse their losing ways last month. Most likely they were long the dollar against a number of currencies. For example, over the past few months, the U.S. dollar has been surging. In the past three months it has gained about 8.5 percent versus the euro and 7.5 percent versus the Japanese yen. At the same time, many commodities markets reversed their climbs and have been tumbling in price, in large part in tandem with the dollar’s surge.
Funds that have been flailing of late have gone in the opposite direction on these trades. In addition, a number of macro funds have lost money going long European equities.
“Long exposure on commodities generated strong losses as energy and metals tumbled over the period, along with an appreciating U.S. dollar,” Lyxor points out in its analysis of why macro funds in general lost money. “Funds were also hurt on rates,” Lyxor added, noting that they were short U.S. debt, “which did not prove rewarding. On the positive side, currency positioning underpinned performance over the last three months as the euro kept depreciating against the U.S dollar.”
The big question now facing many of the macro funds is whether those that were on the right side of these trades over the past few months can continue to get them right and finish the year in the black.
