Demand for Macro Funds on the Up And Up
Alternative investors are turning their attention towards macro funds. According to BarclayHedge, macro funds brought in $2.5 billion from January through April 2010. In all of 2009, macro funds generated inflows of $4 billion dollars.1
Why the sudden shift in strategy?
Lingering doubts about the global economic recovery coupled with Europe’s sovereign debt crisis and China’s shift in monetary policy, which allows the yuan to trade more freely, have caused investors to gravitate toward liquid funds. Macro managers are able to position their funds to take advantage of the ever changing economic climate.
At the recent GAIM conference, a fund manager noted, “the overall environment has been driven by macro events in 2010, and I believe it will continue to be the case because of economic imbalances in the largest markets. With markets highly volatile, macro managers benefited from their ability to take long or short positions in most markets, trade in very liquid products and change positioning nimbly if their view of the economic outlook changes.”2
CS/Tremont data showed that global macro strategies lost only 0.63 percent in May while most funds languished, losing 2 to 3 percent.2 However, some macro funds posted gains of 7 to 8 percent. According to an article in Bloomberg Businessweek, “Macro managers often post a broader range of returns than rivals because they trade in more markets. The range has been even wider this year because of volatile price swings and the diversity of bets on the direction of global economies.”3
Last week, BHA analysts spoke with 23 investors that were interested in managers focusing on macro strategies. For the month of June, more than 100 investors were interested in macro funds, and through the first two weeks of July an additional 40 expressed interest. Many of the investors BHA interviewed were actively researching managers in the hedge fund space. They indicated that they were evaluating macro funds because they were avoiding illiquid strategies. Liquidity was the dominant theme during our conversations with investors.
1 FINalternatives, “Macro Funds Lead As Hedge Funds Return To ’08 Asset Levels,” June 24, 2010, http://www.finalternatives.com/node/12964?time=1277748490.
2 Reuters, “Macro hedge funds best despite May dip,” June 17, 2010, http://www.reuters.com/article/idUSL43649120100617.
3 Bloomberg Businessweek, “Macro Funds Add $2.5 Billion as Trades Proliferate,” June 24, 2010, http://www.businessweek.com/news/2010-06-24/macro-funds-add-2-5-billion-as-trades-proliferate.html.