Macro hedge funds rebound from disastrous first-half

investmentnews.com:

Macro trades have bounced back to become the best performing hedge fund strategy in the third quarter, turning a page on a dismal first half that saw economic uncertainty weigh on managers.

Asset-weighted returns for macro funds hit 3.07% in the three months through September, according to data from fund administrator Citco, which sees over $1 trillion of global hedge fund asset flows.

That’s in contrast with multi-strategy and equities funds, which saw muted losses of around 0.1% and 0.5% respectively in the third quarter, though these strategies remain the top two year-to-date performers.

“The first six months of 2023 were very different from 2022, in terms of what the markets were doing and in respect of volatility — macro managers didn’t do well,” Declan Quilligan, head of hedge fund services at Citco, said in a video call. “But then look at the last two or three months and they’re coming right back — so much so, they’re not a million miles away from breaking even.”

Macro funds, which bet on political and economic events, were in a holding pattern in the first six months of the year, as central banks kept markets guessing on the likely peak for interest rates amid sticky inflation and strong economic indicators.

Volatility ticked up toward the end of August and throughout September, accompanied by a clearer outlook on rates, which made for more fertile ground for macro trades.

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Asia macro hedge funds have outstripped global peers so far this year, profiting from trades that bet on the yen and yuan weakening, as well as relative-value arbitrage on Australian and New Zealand assets. Asia macro funds