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Asia-Pacific-Based Investors’ Healthy Appetite for Global Macro Hedge Funds – February 2015

by Tuck Yew Chan

  • 23 Feb 2015
  • HF

Preqin’s Hedge Fund Investor Profiles online service indicates that macro strategies are the second most favoured hedge fund strategy, after long/short equity, for Asia-Pacific-based investors. Global markets witnessed a number of major policy changes by central banks in 2014 which have given rise for hedge fund managers to profit from such activity – the Federal Reserve ending its quantitative easing program, the European Central Bank slashing its interest rates to record lows and the Bank of Japan further expanding its already considerably large stimulus measures. These factors have contributed to a change in fortune for global macro funds in 2014, which is expected to continue into 2015. In this blog, we look at the appetite of investors in the Asia-Pacific region for macro strategies hedge funds, and how we can expect this to continue in 2015.

Superannuation schemes currently form the largest group (24%) of Asia-Pacific-based investors investing in global macro hedge funds. Superannuation schemes would be particularly attracted to the expertise offered by global macro hedge fund managers, allowing for these pension schemes to invest in a broader spectrum of investments. The flexible mandate of these types of funds and their non-correlation to other strategies can potentially generate returns that outpace inflation on a consistent basis, and are especially valued in a rapidly changing macro environment. Other groups of investors in this region include fund of hedge funds managers (representing 23%) and asset managers (13%).

Hedge funds employing a purely global macro strategy were able to take advantage of macro-economic conditions in 2014, generating 5.07% for the year while outperforming the Preqin All-Macro Strategies benchmark (+1.99%). Given this strong performance, 86% of investment consultants surveyed in the 2015 Preqin Global Hedge Fund Report recommended that their clients should either maintain or increase their allocation to macro strategies hedge funds in 2015. This group also includes commodities and foreign exchange strategies which, in contrast, performed poorly in 2014.

Already in 2015, a sense of global market uncertainty appears to be prevailing, with macroeconomic events dominating the headlines. The Swiss National Bank’s unexpected decision to abandon the Swiss Franc’s cap against the Euro, continuing disquiet in the Eurozone post elections in Greece and the European Central Bank’s €1.14tn stimulus program would suggest that global macro funds will be increasingly in demand as they are ideally positioned to benefit from ongoing macro policy changes. Investors based in the Asia-Pacific region are likely to continue favouring these types of funds in 2015; they continue to offer potentially significant upside in 2015 given the uncertain global economic conditions.

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