The investment theme of short Japanese yen and long European debt worked well for both Pharo Macro Fund and Argonaut Capital in January. Pharo Macro rose 4.8 percent in January, while Tiger cub Argonaut Capital's Macro Fund rose 4.3 percent last month.
Despite some losses in Chinese, Taiwanese and Korean currencies, Pharo Macro was more than able to offset the losses with gains from short yen trades. The hedge fund also gained in its short bets in South African rand after the currency declined 5 percent against US dollar in January. Among emerging economies, Mexico has done particularly well for Pharo Macro where the fund has long positions in interest rate swaps, same goes for Russia.
Pharo Macro hopes for further returns from these countries as their governments and regulating bodies have indicated that they might cut target rates in the coming months. Pharo Macro Fund also gained from longs in Greek, Italian and Spanish government bonds and shorts in French government bonds. Another detractor for Pharo macro was short AUD against euro.
David Gerstenhaber's Argonaut Capital also made big gains from short yen positions, joining a string of hedge funds who have profited off similar bets. Argonaut is engaged in short yen trades going forward as it expects that Japanese government is looking to weaken yen to 100 against the USD. Into the new year, most of the macro focused funds have returned uncommonly well.
According to HSBC's Hedge Weekly, Global Macro strategy funds have returned 2.5 percent on average in the first month of the year. Some of the largest gains have been posted by; Discovery Global - which returned 8 percent, MKP Opportunity Offshore 6 percent, Rubicon Global 6.5 percent and Paul Tudor's BVI Global 4.5 percent in January alone. As shorting yen is a uniform position among hedge funds, it is highly likely that a chunk of the profits were attributable to the weakening in yen.
For Argonaut Capital, the detracting bond yields in Portugal have also been a significant profit maker. Portugal continues to show significant improvement and adherence to ECB's bailout program which will help in further lowering of yields.
Other than Argonaut Capital's long in Portuguese debt, the hedge fund has also profited from the rally in US equities in January. Argonaut also gained from Chinese equities and maintains several long positions in both US and China. However, the hedge fund is cautious about the US consumer sector which has been under stress due to the latest tax hike.