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Size matters as large macro funds outperform smaller counterparts

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Macro hedge funds have enjoyed a renaissance in recent years with the biggest funds – those with over $1 billion in assets under management – showing significant outperformance compared to their smaller sub-$1 billion counterparts, according to a new report from WithIntelligence.

Macro hedge funds have enjoyed a renaissance in recent years with the biggest funds – those with over $1 billion in assets under management – showing significant outperformance compared to their smaller sub-$1 billion counterparts, according to a new report from With Intelligence.

The company’s latest Macro Hedge Funds report reveals that macro was the second-best performing hedge fund strategy last year (behind CTAs) with billion-dollar global macro funds averaging double-digit gains. Haidar Capital, for example, stormed to a 193% blockbuster annual return, its best ever, while Rokos Capital rebounded from its worst-performing year in 2021 (-26%) with a record 51% gain.

This performance was well ahead of the overall hedge fund universe, which lost 5%, as well as stocks and bonds, which had their worst year since 2008. The typical 60/40 portfolio dropped more than 15%.

Global discretionary funds, such as Brevan Howard and Haidar, produced significant excess returns over sub-$1bn funds during the past two years. Billion-dollar funds averaged a 14.9% gain in 2022, their first double-digit gains since 2013 while smaller macro funds lost money on average last year.

According to With Intelligence, the past two years have also seen impressive excess returns from systematic over discretionary approaches in macro. Discretionary global macro had outperformed systematic macro in 2020 by the widest margin since 2015, with billion-dollar funds averaging 14%, but systematic macro has outperformed in the past two calendar years.

This year though has seen a reversal in fortunes for larger funds, which were hardest hit by the banking crisis in March and the sharp reversal in US government bonds, with uncertainty around the US debt ceiling negotiations also leading to lower risk levels and a more cautious trading approach that has muted some returns.

Billion-dollar macro funds were down nearly 3% on average YTD through May, with heavier losses at some firms, while smaller funds are broadly flat so far this year.

While the banking crisis of Q1 was a setback for many larger macro funds who suffered some significant losses, With Intelligence says that their three and five-year return statistics remain compelling.
 

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