Macro hedge funds operating in China, including Bridgewater Associates, posted significant losses in March as heightened geopolitical tensions and sharp swings across asset classes undermined performance, with some of the country’s most prominent strategies experiencing double-digit drawdowns, according to a report by Bloomberg.
Bridgewater’s China-focused systematic strategy, known as All Weather Plus, fell 5.6% between late February and early April, according to performance data cited by sources familiar with the results. The decline reduced first-quarter gains, although returns for the period remained positive and broadly in line with long-term expectations, according to people close to the firm.
Other macro managers suffered steeper setbacks. Shanghai Longlife Investment’s Macro Hedging No1 fund, which was among last year’s top performers, dropped 25% in March, trimming its year-to-date gains significantly. The firm attributed the losses primarily to equity positions during a month of heightened volatility.
Across the broader industry, China’s macro hedge funds recorded an average loss of more than 6% in March, marking one of their weakest monthly performances in recent periods, according to industry data providers. The downturn reflects widespread difficulty in navigating abrupt moves across equities, bonds, commodities and foreign exchange markets.
The sell-off was triggered in part by instability linked to the conflict in the Middle East, which drove sharp fluctuations in oil and other key commodities. These moves rippled through global markets, creating challenging conditions for macro strategies that rely on identifying relative value across asset classes.
Systematic “All Weather”-style funds, which are model-driven and typically diversified across multiple macro exposures, also posted losses, though generally more modest than discretionary peers. By contrast, discretionary macro managers — who make active, human-driven trading decisions — underperformed more significantly and have been the weakest-performing hedge fund segment in China so far this year.
The volatility environment has tested strategies that had previously benefited from broad macro dispersion and trend persistence. Funds that performed strongly in prior years have seen sharper reversals as correlations between asset classes shifted unexpectedly during the period of geopolitical stress.
Despite the difficult conditions, some managers emphasised that drawdowns remained within risk parameters and were consistent with stress-period expectations. Several firms noted that diversification and hedging strategies helped limit losses in certain portfolios, even as other exposures detracted from performance.
The weakness was not confined to China. Global discretionary macro hedge funds also experienced their worst monthly performance in several years during March, highlighting the widespread impact of the market turbulence.
Bridgewater’s broader systematic portfolio has still delivered positive returns over longer horizons, reflecting the strategy’s emphasis on risk-balanced allocations across equities, bonds and commodities. However, short-term performance has been affected by simultaneous declines across multiple asset classes during the period of heightened uncertainty.
Other managers reported mixed outcomes depending on positioning. Some benefited from commodity exposure, while others suffered from equity and bond allocations as markets moved sharply and unpredictably.
Several firms have responded by adjusting portfolio exposures, including reducing equity risk, shortening bond duration and increasing hedging activity to manage downside risk in volatile conditions.
Despite recent losses, many macro managers maintain confidence in their frameworks, arguing that periods of cross-asset disruption are an inherent feature of macro investing rather than a structural breakdown in strategy effectiveness.
Market conditions have shown signs of stabilisation more recently, with some asset classes recovering as geopolitical tensions ease and investors reassess risk premiums. However, performance dispersion across macro hedge funds remains elevated following the March downturn.
