Another hedge fund suffers big losses in emerging markets and commodities—Caxton Hawk Fund slides 4.6 percent in May, incurring losses in EM fixed income and commodities like natural gas and crude oil. The fund has entered June with a net short in EM fixed income assets and neutral on EM equities.
Caxton Hawk Suffered Major Losses
Caxton Associates Caxton Hawk suffered major losses in the month of May, detracting 4.6 percent amid equity and bond market tremors, bringing YTD performance to -4.3 percent. The flagship Caxton Global Investment Fund, AUM $4.4 billion, lost 1.25 percent in the first week of June but is up 11 percent for the year. Caxton Hawk runs a diversified strategy under Jeff Enslin.
Losses In Emerging Markets And Commodities
Apparently the losses toward the later part of the month were so significant that the fund stumbled in all of its strategies. Caxton Hawk incurred the largest detraction in its fixed income assets, in both emerging and developed markets. Changing gears, the fund is now short EM fixed income as it thinks that these markets will undergo their first big correction since 2008.
Emerging markets’ strategy has given pains to hedge fund returns in last month, a trend which has continued into this month as well. Brevan Howard EM Strategies Fund, the largest emerging markets hedge fund, lost 5 percent to June 14, plummeting the YTD returns to -11 percent. In response to EM volatility, Brevan Howard reduced its VaR by 50 percent since May and trimmed several positions, reports Kelly Bit for Bloomberg. The same trend has been followed by Caxton Hawk, which also reduced risk exposure in EMs. Caxton Hawk now has a neutral position in EM equities, however they think that growth fundamentals of EM industries are the same but the markets will inevitably keep giving back their gains for some time.
Long USD against Short EM Currencies
The diversified macro fund was marginally profitable in its long USD positions, however those gains were negated as the fund was not expecting emerging market currencies to plummet so much against the dollar, where it was using USD as a short hedge. Now Caxton Hawk has transformed its position into a long USD against short EM currencies position.
CTAs have been counting their largest losses for the year, down 5 percent in May and marking one of their worst spells in history. Caxton Hawk also underperformed in this asset class. The fund detracted in its long positions in crude oil and natural gas. Other commodity funds have also been suffering the same fate because of the low prices of copper, gold, silver and crude oil.