After recording loses in October, Pharo Macro Fund recovered in November with a return of +1.8 percent, bringing the YTD returns to 8 percent. While the fund gained on most of its positions, detraction in performance came from the Argentine bonds again. Pharo also lost in this position in October. Bond prices fell after a Manhattan court judge ruled in favor of holdout creditors of Argentine debt, asserting that the government cannot continue to pay the holders of restructured debt if it does not pay the ‘vulture funds’. Later the bonds recovered when an appeals court put a stay in order, however by that time Pharo had exited the position.

In our last update, Pharo fund was ready to gain profits from Greek bonds, where a rally was set in motion when a new plan for debt restructuring from IMF, EFSF and ECB was confirmed. With more aid infusion and the announcement of an aggressive bond buying program, bond prices became more lucrative than ever. Greek debt was Pharo’s top gaining position in November. Pharo joins the well known hedge fund, Third Point in profiting from Greek debt. The total stake of all hedge funds in Greek debt amounts to an estimated $33 billion. Dan Loeb, founder of Third Point, held the largest position in Greek debt, among all hedge funds, before he sold some portion of the holding to amass profits worth $500 million.

In the emerging markets forex, Russian rouble gained 1.5 percent against USD, while SA rand lost 2.7 percent against USD last month. The detraction in rand produced gains for the fund which has been shorting the currency for a few months now. Pharo has major focus in emerging market investments. The fund profited from longs in Turkish bonds, Mexican peso and Chinese renminbi, while losing on shorts in Polish zloty and shorts in EM stocks index.

Monetary easing plans are currently being set in play in several of the emerging/developing economies. Policy rates have been revised in Poland, Turkey, Czech Republic and Hungary. By asset classes, Pharo has highest exposure in interest rates, forex and government debt, so these measures are likely to gain more profits in the next months. In China, indicators like export growth and asset prices are looking strong and the fund is optimistic about its position in renminbi. The Chinese government also issued long dated 50 yr bonds at 4.35 percent yield, Pharo finds this an attractive opportunity.

Pharo manages $1.7 billion in assets, down from $2 billion in May.