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Learning the lessons of macro managers

Date: Friday, March 2, 2012
Author: Madison Marriage, Investment Europe

Global macro hedge funds are attracting investors and fund selectors alike as expectations grow for the strategy's performance in 2012.

Global macro hedge funds are increasingly in the spotlight due to their reputation for performing in adverse market conditions.

"An equity long/short fund can be run by two guys with a computer. Macro managers have a lot more information available to them."

A recent Lipper report found that in 2011 “funds with the ability to switch asset allocation across the ­spectrum and with an absolute return focus” attracted €12bn in inflows – a remarkable feat given the crushing redemptions (€69.3bn) seen in most European funds that year.

Don Steinbrugge, founder of Agecroft Partners, highlighted that equity hedge assets had fallen 21% – from $684bn in 2007 to $539bn in 2011. Conversely, global macro and computer-driven styles had grown 50%, from $288bn to $434bn.

Europe’s hedge fund industry has taken note: last month, ­Phillippe Gougenheim, former head of hedge funds at Unigestion, launched a global macro hedge fund outfit.

UK-based Stenham Asset Management recently launched Stenham Helix, a liquid macro fund of hedge funds, to respond to growing interest in the strategy despite the HFRX Global Macro/CTA Index’s poor 2011 performance.

According to its ­investment director Javier Uribarren (pictured), when markets suffer, allocations to most hedge fund strategies dry up. The sole exception is macro hedge funds, which have ­actually benefited from falling interest in hedge funds since 2008.

He believes global macro hedge funds will continue drawing investors as the turbulence witnessed last year is here to stay. “Most of the ­measures taken over the past few years to limit a potential crisis have, in the long term, fuelled one. It is difficult to imagine how short-term volatility could go away,” he says.


The start of 2012 has seen markets stabilise and tense negotiations over Greece’s debt have not triggered the same volatility in equity and bond prices seen last December.

Despite “strong rallies, overall choppiness will persist,” Uribarren believes. In such an environment, “understanding every asset class is absolutely crucial,” he says.

This is what prompts his ­confidence that 2012 could be a bumper year for macro managers, known for their vast knowledge of asset classes, markets and regions.

Last year, there was a dearth of opportunities in equities and credit. This year, the opportunities are ­“outstanding,” he says, adding: “If anyone can capture these opportunities, it will be macro managers.”

He is confident more specialised macro managers with a focus on bonds, credit or equities will stand out from the rest.

Structure is also important. The fund managers most likely to succeed will adopt an institutional structure, ensuring the fund is well managed and risk management is exemplary.

“An equity long/short fund can be run by two guys with a computer. Macro managers have a lot more information available to them.”

An equity long/short fund can be run by two guys with a computer. Macro managers have a lot more information available to them.

Stenham Helix has a target return of Libor +5/6%. It bears similarities to Stenham Trading, Stenham’s flagship macro fund of hedge funds, although its underlying assets are more liquid: Helix offers monthly liquidity with 35 days’ notice, while Trading has a 95-day notice period.

Helix was launched to respond to investors keen on a global macro product mixed with high liquidity.

Uribarren says liquidity is not the most important factor when selecting underlying hedge funds: “First and foremost is selecting top tier ­managers.” He has a bias for discrete trading managers and systematic commodity trading advisers.

Trading’s investors are global, with 50% placed in the UK and Northern Europe, and the rest divided between Latin America, the Middle East and Asia. One third of its investors are p­ension funds and charities, with the remainder high net-worth ­individuals and private banks.

“Overall, global macro tends to show lower correlation than other strategies to equities, although last year global macro returns were very disappointing. Every single hedge fund strategy posted negative returns which is a very unusual scenario.”

Uribarren believes what macro managers got wrong last year was “misreading government policy and its effect on markets”. Many macro managers went short on the euro and long on commodities – calamitous decisions for their funds.

Uribarren’s views this tricky policy year cautiously. Last year, the majority of the 15 managers in Trading posted flat performance, and he ­anticipates policy will continue affecting ­markets this year.

Have global macro ­managers equipped themselves for 2012 with lessons learnt from last year?

“I hope so,” he concludes.