Global Macro hedge funds had a dull running in the first half of this year. According to Eurekahedge, the strategy posted an average return of just 0.24% in the first half. Global macro remains the consistent underperformer of the year, in some cases managing an even lower return than managed futures. On the other end the new strategy in the race is now distressed/credit hedge funds, these managers are having a much better than usual year this time. The average return of credit hedge funds has been higher than event-driven and long/short equity hedge funds in some cases.

Comparison of Distressed and global macro Hedge funds across Indices

Mudrick Distressed fund grabs +15%

Hedge funds are making money in distressed assets through holdings in previously bankrupt companies rather than the typical direct investments in debt. Among the winners in the distressed category is a relatively less known Mudrick Distressed Opportunity Fund, which has amassed a +15% return in the first half. According to Bloomberg’s Kelly Bit, Mudrick has investments in iPayment Inc., Verso Paper Corp. (NYSE:VRS), Catalyst Paper Corp (OTCMKTS:CTLFQ) (TSE:CTL) and Lee Enterprises, Incorporated (NYSE:LEE).

Another investor of distressed assets, Maglan Capital, is sitting on a similar gain. The fund manages less than $100 million but has produced big gains from its holdings in once-bankrupt Globalstar, Inc. (NYSEMKT:GSAT), among others.

Credit heavyweights are up as well

Jon Bauer’s Contrarian Capital is up 5.63% in the Contrarian Capital Fund I through the first half of the year, according to a monthly investor update seen by ValueWalk. Mitchell Julis and Joshua Friedman’s Canyon Capital has capped a return of 3.6% through May. Canyon has positions in several distressed assets in the European region.

James Dinan’s credit focused fund is doing especially well with a return of 12% through mid of June in the York Credit Opportunities Fund. John Paulson has several investments in his portfolio which are booming these days as defaulted companies are climbing back up; and the Paulson Credit Opportunities Fund is up 6.5% through May of this year. Paulson’s funds are up from liquidations of Lehman debt, restructuring at Solocal Group SA (EPA:LOCAL), Energy Future Holdings (TXU)  and GMAC Rescap.

Others in the distressed strategy who are having a good year include, Candlewood Special Situation Fund, up 8% YTD through June 13 and Steve Feinberg’s Cerberus International is up 7.9% in the first five months of this year, according to investment returns seen by ValueWalk.

Big ones fall in global macro

On the other end global macro funds are having a rough year, in part due to emerging markets and the relative slumber in volatility in the global markets. Some big names are on the losing end, including Brevan Howard Master Fund, Tudor B.V.I Global, Fortress Macro, Discovery Global. Brevan Howards’s Master Fund is down 4.22% through May; and Fortress Investment Group (NYSE:FIG)’s macro strategy is sitting on a loss of 3.4% for the year till the first two weeks of June. Tiger cub Rob Citrone’s Discovery Global Macro Fund and Global Opportunity Fund is each down 12.2 and 8.2% YTD respectively. Paul Tudor Jones’ B.V.I Global funds are down some 4% YTD.

Omni and Pharo Macro are up in tough times

It is not just the large hedge funds which are having bad luck in their macro trades; smaller managers are in equal trouble. London-based TT International is down 4.3% in the first five months of this year. Rubicon Global, which grabbed a return of  18% in 2013, is down 17% so far this year. Omni Macro and Pharo Macro Fund are the only two managers who are making some money, Omni is up 4.4% YTD whereas Pharo Macro is up 8% through May.

However, these macro managers could turn their losses into profits as soon as volatility springs back up which some believe is not likely to sustain at these low levels for much longer.

Note: The YTD returns are through June 13th unless mentioned otherwise.