Macro Hedge Funds Back in the Box Seat
Posted by Colin Lambert. Last updated: March 9, 2023
After a mixed start to the year, macro hedge funds returned to the black in February amidst a difficult second month of the year for the sector generally.
While the HFRI 500 Fund Weighted Composite Index fell 0.38% after a strong January, macro strategies diluted the loss with the investable HFRI 400 (US) Macro Index rising an estimated +0.56% for the month. The HFRI Macro (Total) Index added 0.2%, with gains in quantitative, trend-following CTA strategies offsetting declines in fundamental discretionary macro. The HFRI 500 Trend Following Index advanced 0.9%, while the HFRI Macro: Discretionary Thematic Index fell 0.06%.
Event driven strategies actually outperformed macro in February, HFR says its index for that sector was up 0.64% for the month. Elsewhere, fixed income-based, interest rate-sensitive strategies produced mixed performance, as investors positioned for continuation of generational inflationary pressures and interest rate increases. The investable the HFRI 500 Relative Value Index declined an estimated 0.14%, while the HFRI Relative Value (Total) Index gained 0.1% for the month.
HFR also unveiled a US-dedicated indexation service, the HFRI 400 (US) indices, aimed at US retail and high-net worth investors, based around private hedge funds open to US taxable investors. HFR says they utilise a similar methodology and construction to the 500 family of indices. “With the launch of the HFRI 400, US retail, high net worth and ultra-high net worth investors now have a robust investable benchmark for hedge fund performance, mirroring that of the HFRI 500 Index for offshore investors and institutions,” says Kenneth Heinz, president of HFR.
On the performance of the main indices, Heinz says, “Hedge funds and industry exposures adapted to deteriorating macroeconomic conditions in February with gains across macro and event driven strategies complemented by mixed sub-strategy performance across fixed income based relative value and select, low beta equity hedge exposures. In a similar manner to 2022, hedge funds exhibited strong, defensive outperformance of equity market declines in February, driven by gains in quantitative, trend following macro, as financial markets experienced a sharp reversal of the risk-on sentiment from January and investors positioned for a continuation of the trends of generational inflation, higher interest rates and economic uncertainty.
“Dynamic, robust exposures and positioning by hedge funds have enabled forward looking institutions to effectively navigate recent financial market volatility and the historic breakdown of correlations between equity and bonds that significant institutional capital allocations are predicated on,” he adds.