The results of Italian elections were an eye opener for those who had faith left in the strength of European Union. The people of Italy, especially the youth rebelled against the continued austerity and the failure of government to provide relief for the common men. The Five Star Movement, run by comedian turned politician Beppi Grillo, amassed 25 percent of the cast vote in Europe’s third largest economy. For the eurozone, this event marks a tough time when the people of a major country showed their dissatisfaction with ECB’s policies and programs. After the Feb 24 elections, when it became apparent that no single party had gained a clear majority, the EUR declined sharply in response. The surprise electoral results brought losses in long Euro positions of several macro focused funds whereas short EUR trades gained in February. Omni Macro was up 1.8 percent in last month, gaining 0.66 percent specifically on short euro positions. This marks a recovery from a -1.3 percent detraction experienced in January.
Other positive drivers of Febrauary were long in USDHUF, short DAX, short AUD, short USDJPY, and short oil. The fund lost in short positions in SP500. The total returns of Omni Macro for the first two months of the year are now up 0.41 percent. In response to the disappointing economic data from eurozone and the hawkish comments from ECB’s press conference in Feb, the fund added more short positions in Euro and sold previously held Euro against USD and GBP. The hedge fund also sold oil after Federal Reserve’s January meeting, however the managers think that the decline is only short term.
In contrast to Omni Macro, some global macro funds declined in February according to data from Lyxor. Ray Dalio’s Bridgewater Associates was down 2.5 percent through Feb 26, whereas MLM Macro was down 6 percent in the same period. TT International’s TT Fund detracted by 0.66 percent in last month.
Currently the eurozone is at an uncertain position which is hinging at the success of coalition government efforts. Returns in March will be driven by how Euro behaves against the future government of Italy.