Hugh Hendry’s Eclectica Absolute Macro Fund saw a tough September, failing to benefit from the rebounding markets that benefited most other hedge funds. The fund lost 1.8% in September, reducing year to date return to -2.6%, according to returns from a monthly performance report seen by ValueWalk. The fund manages $276 million.

hugh hendry

Hugh Hendry loses on EM shorts

Eclectica has short exposure in emerging markets including China, saw most losses in its shorts in emerging market currencies against the U.S. dollar which were down by 102 bps. Eclectica has shorts in Indian rupee, Brazilian real, South African rand, Mexican peso and South Korean won against the USD. Eclectica’s returns were slashed as EMs basked in the glory of the no-taper decision by the Fed. In August the fund made money on short forex positions in EMs as central banks of these countries scrambled to stop outflows.

The fund also has exposure to Turkish indices which was a major factor in building up losses, as shorts in Turkish index futures lost 21 bps. Eclectica is hedging its short bets in emerging market equities against longs in S&P 500 futures.

Only two months of positive returns

Unfortunately for Eclectica, the fund has recorded only two months of positive returns this year in February and March, when it was up 1.1% and 2.4% respectively. Eclectica Absolute Macro has the largest exposure in forex while the rest is divided in equities and fixed income. 84% of the fund’s gross NAV is in the form of cash holdings.

The value at risk in equity holdings has ballooned from 44% in August to 64% in September, conversely risk in fixed income holdings contracted to 11.6% from 35% in August.

The Eclectica Absolute Macro’s top holdings on the basis of NAV are, Korean 3 year bond futures, Australian 3 months interest rate futures, Eurodollar interest rate futures and Japanese 10 yr bond futures. Hugh Hendry is long on Japanese equities and has position in TOPIX index futures.

EAMF1309.pdf by ValueWalk.com