Global macro hedge funds beat peers in volatile times

Global macro funds outperformed most other hedge fund strategies in the third quarter of 2011 as bearish bets on commodities, equities and the euro started to pay off.

Hedge funds running macro strategies were down 0.86% compared with losses of 1.93% for the industry generally, according to Hedge Fund Research.

The stronger third quarter marks a reversal of fortune for macro funds, many
of which struggled in the first half of the year when political and economic uncertainty created a difficult environment for directional traders.

As governments came under growing pressure to show monetary and fiscal restraint in the third quarter “investable trends developed and the fundamental outlook became more accurately reflected in the pricing of financial assets”, said Javier Uribarren. He is  investment director at Stenham Advisors, a fund of hedge funds (FoHF) which has a high allocation to global macro strategies.

Global macro managers generated strong returns by shorting commodities as a proxy for slowing growth, tactically trading equities with a short bias and shorting the euro and emerging market currencies against the US dollar, according to Stenham.

These funds are also going long fixed income in the US and Europe in expectation of further quantitative easing and slowing growth in these countries.

“In July, many managers turned a pro-cyclical stance to an outright bearish one in a short time to capture the sell-off in risky assets,” said Sukie Darar, senior research analyst at Stenham Advisors.

“This has been expressed broadly across many asset classes with managers making profits in interest rates, foreign exchange, equities and commodities.”

This article first appeared in our sister title Hedge Funds Review. Go to: www.hedgefundsreview.com