Two Sigma Investments’ primary onshore China macro strategy remained under pressure in April, extending losses after a sharp drawdown triggered by geopolitical volatility linked to the Iran conflict earlier this year, according to a report by Bloomberg.
The report cites investor communications reviewed by Bloomberg as revealing that the firm’s Shanghai-based Juliang Macro fund declined 0.9% in April following a 7.9% loss in March – its worst monthly performance since launching in 2020.
The March downturn came as turmoil in energy and commodity markets disrupted positioning across global macro strategies. In a letter to investors, the hedge fund said escalating tensions in the Middle East drove an abrupt rally in crude oil and related commodity sectors while simultaneously weighing heavily on Chinese equity markets.
The dislocation hurt both sides of the portfolio, with losses stemming from short positions tied to industrial, energy and chemicals exposures, as well as long positions in equity index futures, according to the letter.
Macro-focused hedge funds globally faced a difficult environment during the period as the Iran-related conflict generated sharp swings across commodities, equities and fixed income markets. In China, performance pressure extended to several of the largest international hedge fund operators, including Bridgewater Associates’ local business alongside Two Sigma.
While some macro managers recovered part of those losses in April, Two Sigma’s flagship China macro vehicle remained negative for the month.
Despite the recent volatility, the Juliang strategy has generated annualised returns of 14.2% since inception through the end of April, according to the investor data.
The firm’s second major onshore strategy — the Dingliang Index Enhanced Strategy, which tracks the CSI Smallcap 500 Index — experienced a sharp rebound after a difficult March. The strategy fell 9% during the market turmoil before rising 15% in April, bringing year-to-date returns through April 30 to 23%.
According to the materials, the strategy has outperformed its benchmark by 11 percentage points this year and has delivered annualised returns of 24% since launch, compared with 11.7% for the underlying index.
Two Sigma expanded its mainland China footprint significantly last year, with assets under management for its local strategies surpassing RMB10bn for the first time following additional fundraising activity.
