Most hedge funds struggled during times of extreme market volatility, according to a new report from JPMorgan.
But one subsector of the industry, macro managers, have thrived in market chaos, JPMorgan found, including during this year’s coronavirus sell-off.
Now, institutional investors are turning to macro managers for diversification in their portfolios, and even considering small managers.
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Alan Howard has not let a crisis go to waste.
The billionaire co-founder of Brevan Howard has made eye-popping returns across his macro-focused funds after years of underperformance and redemptions. He made a personal best 18% in March alone, when the pandemic spread rapidly across the US, shutting down the global economy.
It was an exception in the hedge fund industry, where many funds — like quants and structured credit managers — were hit with losses and margin calls. But it wasn’t an exception for the macro world.
Managers like Greg Coffey’s Kirkoswald and Chris Rokos’ eponymous fund put up solid returns; Rokos has even re-opened to new money.
Even as the markets have calmed down in recent months, JPMorgan’s global market strategist David Lebovitz expects the demand for these types of managers to continue.
“Firms are being forced to think about how they build portfolios” in a low-interest rate environment, he said in an interview with Business Insider. Lebovitz works with the clients of the firm’s asset management business to understand what they are looking for in a money manager, and helps compile the firm’s Guide to Alternatives report.
Getting diversification and protection from equity markets is tough, and traditional sources for it — like high-quality bonds and real assets — have become expensive to hold.
“Increasingly, we are seeing people do this through hedge-fund strategies, in particular macro managers,” he said.
The average hedge fund, JPMorgan has found, …read more
Source:: Business Insider