These Macro Funds Are Winning Big In August As Volatility Surges

Several macro hedge funds are on track for a banner month in August as fears of slowing global growth and protracted trade tensions sparked a long-awaited resurgence of volatility in currency and credit markets.

Hedge funds from New York’s Haidar Capital Management to Hong Kong-based Counterpoint’s Asian macro fund have posted hefty returns in August as haven assets such as gold, the yen and Swiss franc rallied, and China’s yuan weakened.

Said Haidar’s $650 million fund advanced about 11.6% through Aug. 21, according to a person with knowledge of the matter. Crescat Capital’s macro fund surged 16.6% through Aug. 23; the $335 million PruLev Global Macro Fund was up 11% through Aug. 16; and Counterpoint is up just over 4% after fees, manager Geoff Barker said early last week.

The firms’ returns for the month have outstripped some of their macro peers as funds such as Autonomy Capital and VR Capital Group suffered losses on the swoon in Argentine markets. They are also beating Hedge Fund Research’s HFRX Macro/CTA Index, which was up 0.5% this month through Aug. 23 and measures macro hedge funds and so-called commodity-trading advisers.

Still, the gains may have come too late for some investors. Around $12.8 billion was pulled from macro funds in the first seven months of this year, according to eVestment, as investors who had poured $14 billion into the strategy the previous two years grew disillusioned amid subpar returns.

While some veterans such as Paul Tudor Jones and Alan Howard bounced back last year as worsening trade tensions, political turmoil and rising interest rates roiled markets, macro funds as a group failed to stand out. About 44% of allocators said discretionary macro, which relies on human judgment to spot trading opportunities, disappointed in 2018, according to a Deutsche Bank AG survey released in March.

Macro funds trailed average returns of all hedge-fund strategies in 2016 and 2017, posted a loss last year and just kept pace with rivals in the first seven months of 2019, according to indexes compiled by Eurekahedge Pte.

Then came August. The U.S. yield curve inverted as 10-year rates dropped below two-year yields -- a strong indicator in the past of a looming recession. Investors who have lost faith in the ability of easier monetary policy to boost growth and inflation turned to safe assets such the Japanese yen, Swiss franc and gold, which surged 8% in two weeks, reaching a six-year high on Aug. 15.

As long as funds avoided this month’s wipeout in Argentina, they probably did quite well, according to Rob Christian, co-head of investment research and management at K2 Advisors in Stamford, Connecticut.

“If you had emerging markets or Argentina, you are probably down on the month; and then most other managers have made money on interest rates in general, or some theme around that,” he said. “We think it will continue to be a fertile environment for macro. And we think the geopolitical pressures will continue to remain high.