“Macro” hedge funds are back in favour with investors seeking to take a view on U.S. 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.
Even though macro funds are flat on average for the first two months of 2017, making gains of just 0.38 percent, according to Hedge Fund Research, the popularity of macro strategies is not in doubt. A Credit Suisse survey in March of more than 320 institutional investors with US$1.3 trillion in hedge funds showed macro was set to be the favourite strategy of 2017. Preqin data showed that after pulling assets out of macro for three back-to-back quarters, investors added US$6.4 billion to the strategy in the fourth quarter of 2016 after Trump’s win. eVestment data showed that macro funds have pulled in US$4.4 billion in the first two months of 2017, demonstrating a turnaround from 2016 when investors took US$9.8 billion out of macro after withdrawing US$10 billion in 2013 and US$19.1 billion in 2014.