Most major macro hedge funds seemed to muddle through August, losing or gaining a small percentage but not getting rocked like many high-profile long-short and activist funds.
But while many macro hedge funds are in the black, 2015 is shaping up to be the third mediocre year for the strategy in the past four years.
However, a lot could change on Thursday — and in the months following — after the Federal Reserve decides whether or not to raise interest rates for the first time in nine years.
The macro funds could use some help. The Lyxor Global Macro Index was down 2.6 percent in August, slashing its gain for the year to 1.94 percent. However, in a recently published analysis, Lyxor Asset Management pointed out that the strategy was doing pretty well until the last week of August, “with a slightly positive” month-to-date return.
However, many macro funds proved unable to withstand the huge declines across a variety of markets. “While cautiously exposed to risky assets, their hedges had little efficiency in the selloff,” Lyxor said in its most recent monthly report.
Macro funds were hurt by their long positions in equities and U.S. dollar positions. At the same time, there was “limited cushion from bonds or safe havens.”
Lyxor pointed out that after the sell-off, the funds that comprised its macro index were, on average, 10 percent net long in their equity book, down from 15 percent in early August. More than half their equity positions were in Europe.
Macro funds are also continuing to play the reeling commodities markets. And in general, they are still long the U.S. dollar, especially versus the euro and the British pound.
Among the largest high-profile macro funds, one of the top performers in August was Caxton Global Investment, managed by Andrew Law’s New York–based Caxton Associates. The fund climbed 3.15 percent last month, extending its gain for the year to 8.19 percent.
Last year, however, Caxton Global lost 1.36 percent.
Louis Bacon’s Moore Global Investments fell nearly 1 percent for the month but is still up 4.1 percent or so for the year through August. Last year the fund finished up 1.7 percent, after being down through October. The fund is managed by New York–based Moore Capital Management. Moore Macro Managers Fund, which Bacon is not as involved in, was essentially flat in August and up 3.8 percent for the year.
Paul Tudor Jones II’s Tudor BVI Global Fund, managed by his Greenwich, Connecticut–based Tudor Investment Corp., was down about 0.8 percent last month, cutting its gain for the year to 1.2 percent. Last year it was up 3.2 percent. The firm’s newer Tudor Discretionary Macro Fund is up 2.38 percent for the year.
BH Macro, a closed-end investment company that invests substantially all of its assets in London-based Brevan Howard Asset Management’s Brevan Howard Master Fund, lost 0.79 percent in August, cutting its gain for the year to 1 percent.
One fund that continues to sink lower is the Fortress Macro Fund, which lost another 4.44 percent last month, making it one of the worst performers in the strategy. As a result, it extended its loss for the year to 13.45 percent. Fortress was down 1.6 percent in 2014, which was a difficult year for macro funds. In a shake-up last month, Stuart Bohart resigned as president of Fortress Investment Group’s hedge fund business after spending five years with the New York firm.
Fortress spokesman Gordon Runté told the Wall Street Journal in a statement at the time: “It has been a very challenging 18 months for our macro fund and the liquid markets business. Our overriding focus remains on turning performance around as we see a rich macro opportunity set today.”
Now, as investors await the Fed decision, much will ride on how macro funds are positioned, what they are betting on, and how they and the markets react for the remainder of the year.
