Global Macro hedge funds have been struggling this year, however last month brought some respite from a series of tough returns, but only for a few players. Credit Suisse hedge fund index recorded a 1% increase in the global macro sub-strategy. The average return for the year has now edged up to +2.53% according to the index.

Natixis Hedge Fund Strategies Macro
Via Natixis

October saw overall positive news from the U.S and Europe; the main surprise contribution came from the last minute budget deal that was struck up in the U.S. The Eurozone remained largely uneventful in October, however a surprise cut in November drove interest rate to nearly zero, hurting longs in the euro. Other than the extension of the debt ceiling, the nomination of Janet Yellen as President Obama’s choice for Fed chair came as major market-moving news. Given that Yellen is supportive of an easy monetary policy, it is probable that Bernanke’s philosophy will prevail and Fed will reduce its unemployment rate target to a lower figure than 6.5%.

Global macro strategy is still coping

Most notably, Brevan Howard’s Emerging Market Strategies was up once again in last month with a 1.36% return, reducing the YTD loss to -11.7%. However BH’s Asia Fund, the consistent gainer of this year, lost 1.26% and is now up 8.1% overall. The flagship Brevan Howard Master Fund was down 0.59% and is now up only 0.84% for the year. Brevan Howard’s master fund is now dangerously close to recording its first down year in its history.

Read more: Brevan Howard Overtakes Man Group As World’s Largest Hedge Fund

Fortress Asia Macro Fund was up 0.47%, total gain has now edged up to 12.16%. BlueCrest Emerging Markets Fund was up 0.24% in October, netting a total gain of 3.5% for the year.

TT International up on long European equities

TT International Fund finally recorded a gain of +0.63% in October after underperforming for a few straight months. The fund recorded its highest profits in its European equity portfolio but suffered a minor loss in its long position in the euro against USD. Even though the Fed decided not to fix a time to taper QE, the meeting resulted in near-term expectations of the event. As a result the USD strengthened against the euro, affecting the fund’s position – TT International has now exited this hedge.

TT International’s best-performing positions among European equities were Hellenic Telecom Organization S.A. (OTCMKTS:HLTOY), Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), Koninklijke Philips NV (NYSE:PHG) and Valeo SA (EPA:FR). Shorts in FTSE and EuroStoxx futures, however, lost money. The fund is particularly bullish about European equities, believing that the market is entering into a strong season.

MaxQ, Woodbine slip

North Asset Management’s MaxQ Macro Fund did not so so well in October: the fund lost 0.79% in the month, trimming the total return to +7.35%. The fund gained the most in the Scandinavian region while suffering the highest detraction in the emerging markets.

Woodbine Capital, another global macro hedge fund, was also down in October. According to a monthly update from the fund manager, Woodbine Capital lost 1.78% in the period, which pulled the year-to-date return down to -1.29%. Here again in Woodbine’s case, the hedge fund did well in European equities and gained in long European interest rates and U.S stocks at the same time. Woodbine suffered a loss in long Japanese equity holdings. The Nikkei suffered a decline as interest rates in China unexpectedly spiked and investors in Japan became fearful of slower growth in the Middle Kingdom.

Woodbine continues to expect that risky assets will trade up in Japan, as the country’s largest domestic investor, the Government Pension Investment Fund, allocates more money to foreign bonds and domestic risk assets. In October, the fund initiated a new long position in short dated Brazilian and Australian interest rates.

Another medium-sized global macro hedge fund, Omni Macro, lost 2.09% in last month, according to a monthly investor update. The fund is now down 5.12% for the year.

Paul Tudor Jones’ Tudor Discretionary Macro Fund was down 0.6% in October; the fund manages $1.3 billion. Tudor B.V.I Global was nearly flat over the same period.

With the debt ceiling matter resolved or at least postponed for a couple of months, risky assets are likely to trade up over the coming period. Moreover with Janet Yellen all set to be crowned as the net Fed chair, the decidedly dovish U.S. fiscal policy will have a far-reaching impact on the global macro scene. In face of no-taper, the euro is expected to strengthen against the dollar and emerging markets are likely to experience a longer period for reprieve.

The returns mentioned in this post are from HSBC Hedge Weekly, unless noted otherwise.

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