Macro hedge funds are back in favour with investors seeking to take a view on US President Donald Trump’s economic policies, European elections, or interest rates, but it is start-up funds rather than established players which are attracting cash.
Some of the main beneficiaries of the macro revival are managers who cut their teeth at the big macro firms such as Moore Capital Management, Brevan Howard and Tudor Investment Corp, which made their names for outperformance in 2007-2009.
Eric Siegel, head of hedge funds at Citi Private Bank, said in general that macro strategies are likely to thrive. “With volatility coming back and monetary supply tightening, we believe it could be a great environment for macro managers,” Siegel said.
Macro funds bet on macroeconomic trends using currencies, bonds, rates and stock futures.
They outperformed the broader industry during the financial crisis and amassed tens of billions of dollars between 2010 and 2012.
But they lost most of those assets between 2013 and 2014 and also in 2016 for a variety of reasons, including performance.
But macro is back in vogue and was the most popular hedge fund strategy among investors in the fourth quarter of 2016 and the first two months of this year, according to industry data providers Preqin and eVestment.
Moore Capital’s Louis Moore Bacon, Alan Howard, who co-founded Brevan Howard, and Paul Tudor Jones of Tudor Investment were among the macro stars after years of delivering double-digit returns.
But during the lean years, when macro was less in favour, they had to cut fees and in some cases staff.
Now newcomers, such as Moore Capital spin-out Stone Milliner, are pulling in cash and producing some strong returns.
Stone Milliner’s discretionary global macro closed to new money last year after taking in over $4 billion in the previous two years.
Moore Capital’s assets have fallen slightly from $15 billion in 2012 to $13.3 billion as of Dec. 31 2016, filings with the US Securities and Exchange Commission (SEC) showed.
Anglo-Swiss firm Stone Milliner, set up in 2012 by former Moore Capital portfolio managers Jens-Peter Stein and Kornelius Klobucar, averaged returns of 8.3 per cent between 2014 and 2016, a source said, while Moore Capital Management averaged 3.4 per cent, a second source said.
London-based Gemsstock, set up in January 2014 by Moore Capital trader Darren Read and his co-founder Al Breach, made 12.8 per cent on average over the same period, documents seen by Reuters showed.
Chris Rokos, a Brevan Howard alumnus, raised another $2 billion in February after returns of 20 per cent in 2016.
EDL Capital made gains of 18.4 per cent last year after ex-Moore Capital trader Edouard De Langlade launched the firm in September 2015, according to a source. It has amassed assets of $450 million to date, he said.
Ben Melkman, who also formerly worked at Brevan Howard until May 2016, raised over $400 million for his launch in March, SEC filings showed.
Brevan Howard’s firm-wide assets fell to $14.6 billion in 2017, from $37 billion in 2012.
But the old guard are fighting back. Some have been cutting fees and offering alternatives.
Howard, Brevan Howard’s co-founder, last month launched a new fund managed solely by him, which sources said has already amassed more than $3 billion.
Tudor Investment lowered its management fees to 1.75 per cent and performance fees to 20 per cent in February after a reduction last year and Moore Capital cut the management fee on its Moore Macro Managers fund to 2.5 per cent from 3 per cent. — Reuters
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