Alan Howard's 30% Gain Marks Redemption for Macro Hedge Funds

(Bloomberg) -- For years macro hedge funds have been the bane of the industry. Now they are a boon.

Billionaires Paul Tudor Jones and Alan Howard both suffered losses in 2017 in their main macro funds as they struggled to pull out of a deep funk. They finally did it in 2018: Jones’s BVI Global fund, his biggest, was up 10.3 percent, according to people familiar with the matter. The Brevan Howard Master Fund rose 12.3 percent, and the pool Howard manages himself jumped 30 percent, according to people with knowledge of the firm.

Not long ago, macro managers were complaining that there wasn’t enough market volatility to make money. Jones trimmed staff, cut fees twice and hired scientists to regain an edge. Howard, who saw his firm’s assets plunge to $6.6 billion as of October from more than $40 billion in 2013, downsized his headquarters and allowed his star traders to run their separate money pools.

What a difference a year of trade tensions, political turmoil and rising rates can make. Macro investing, in which managers wager on economic trends, was the best performing strategy last year after bringing up the rear in 2017, according to Hedge Fund Research. The HFRI Macro Index rose 1.9 percent last year on an asset-weighted basis, while both the S&P 500 and a Barclays government bond index fell.

Macro Outlook

“Macro gets a lot of bad press, but it’s no coincidence to us that they were the best performing strategy in our portfolios in 2016 and 2018, which were both more volatile years,” said Akshay Krishnan, head of macro and trading strategies at Stenham Asset Management. “We believe macro funds should do well in 2019 as volatility is unlikely to go back to the extremely suppressed levels of 2017.”

Tudor Investment Corp., which manages $7 billion, also made money with Dharmesh Maniyar’s macro fund, which uses machine learning. It gained 15.4 percent last year after just 15 months of trading, one of the people said. Maniyar will be spinning out the fund from Tudor next year to make it his standalone business.

Read about Element’s robust performance

But not every macro fund made money. Rob Citrone’s Discovery Global Opportunity Fund slipped 8.7 percent in December and ended the year down 13.2 percent, a document seen by Bloomberg shows. Ben Melkman, a Brevan Howard alumni whose Light Sky Macro hedge fund was backed by Steven Cohen and Dan Loeb, lost money for the second straight year, ending 2018 down 2.3 percent.

Representatives for the firms declined to comment.

Alan Howard's 30% Gain Marks Redemption for Macro Hedge Funds

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