It has been a difficult year for hedge funds, and July only added to the misery. The hedge fund industry, as tracked by Hedge Fund Research in Chicago, was down 2.20 percent that month, as measured by the HFRI fund-weighted composite index, sending the index down 1.29 percent for the year. The good news: Some managers, as usual, can be counted on to stay buoyant in choppy seas. Although macro funds as a group were down 2.63 percent in July, several of them relied on their multiasset investment expertise and bearish views to keep their funds above water.
Roy Niederhoffer’s New York–based Negative Correlation Fund, for instance, uses strategies that capitalize on bear markets. The fund did not disappoint in July, when the $772 million portfolio rose 4.69 percent, delivering a 12-month return of 37.29 percent compared with the HFRI macro benchmark gain of 8.38 percent. The fund, which makes high-frequency trades in equity, fixed income, foreign exchange and commodities (in that order), was designed to perform best in down markets.
“Strategies like this tend to do better when there are high levels of short-duration volatility,” Niederhoffer says.
Two former British Treasury economists, Adrian Owens and Andrew Snowball, also had a good July — and a good year, for that matter. Their $263 million London-based JB Global Rates Hedge Fund, which invests in interest rate and currency markets, produced a 4.49 percent return in July and exceeded 15 percent over 12 months.
Owens says the fund, which is part of $14 billion Augustus Asset Managers, also based in London, has done so well largely by identifying overlooked currency and interest rate markets that outperform, rather than using once-popular carry-trade strategies, in which funds sell low-interest-rate currencies and use the proceeds to buy currencies yielding higher interest rates. Such trades backfired when global markets destabilized.
