Woodbine Capital had a tough August. The fund was down 4.6 percent in the last month, which has plummeted the YTD returns down to -0.78 percent. The fund was doing no wrong in the UK and given the dovish outlook of the Bank of England, was positioned on the long side of interest rates and equities. However, despite Mark Carney’s assertion that interest rates will remain unchanged, markets chose to focus on the UK’s stronger growth data and, as a result, yields climbed and GBP strengthened, hurting both of the fund’s positions.
Global macro funds lose in August
Global macro funds did not have an easy run in August; most big ones suffered detractions in the period. Credit Suisse Global Macro Hedge Index was down 0.92 percent in the last month. Major macro hedge funds who lost in August included Element Capital Fund (down 1 percent), Rob Citrone’s flagship Discovery Global Opportunity Fund, which took a loss of -0.32 percent, TT International Fund, which was down 3 percent, Fortress Asia Macro Fund, which was down 0.63 percent, Fortress Macro Fund, which was down 1.3 percent, and Caxton Global Investment Fund, which also lost 1.3 percent in August.
Japanese equity loses steam
Most macro funds have significant exposure in Japanese equities and suffered losses in the last month as the Japanese equity market corrected and Nikkei closed down 2 percent in August. However, Japanese investment funds have managed the highest regional gains despite losses in recent months.
Woodbine also took losses in its Japanese portfolio
Woodbine also took losses in its Japanese portfolio; the fund has scaled back its exposure in the region given the recent run of volatility. We have discussed the implications of the imminent consumption tax hike in Japan, and Woodbine thinks a parallel cut in corporate tax would be a positive for Japanese equity markets.
In light of the Fed’s announcement of maintaining its asset-repurchase program, Woodbine has added to its longs in interest rate curves in both Europe and U.S. The fund sees the exit of Larry Summers from Fed’s candidature as a positive, since the alternatives are likely to be more in favor of an easy policy.