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Macro Strategies Hedge Funds Attract Attention as Commodity Hedge Funds Disappoint – September 2015

by Claire McNeil

  • 02 Sep 2015
  • HF

Fifty-three percent of institutional investors tracked by Preqin’s Hedge Fund Investor Profiles include macro strategies as a portfolio preference. Fifty-five percent of these investors gain exposure solely through direct hedge fund investments and 14% exclusively through fund of hedge fund investments. Fifty-six percent of institutional investors based in the US allocate to macro strategies, compared with 52% in Europe and only 37% in Asia.

The number of macro strategies hedge funds launched on a quarterly basis has been in steady decline since Q3 2013 when 75 funds were launched, accounting for 27% of the total number of funds launched. In Q1 2015, this figure had fallen to 31 fund launches, accounting for 17% of all fund launches – the smallest proportion witnessed since Q2 2012. 2015 YTD has also seen macro funds account for only 18% of all fund launches, the smallest proportion since 2007.

Over the course of the last 18 months, Preqin’s All-Macro Strategies Hedge Fund benchmark witnessed the fewest (6) negative months of all the macro strategies, closely followed by foreign exchange (7). In contrast, commodities funds have witnessed 12 negative months out of the last 18. Commodities have also performed comparatively poorly out of the macro strategies when looking at the annualized figures; they are in negative territory for the one-, two-, three- and five-year horizon, while the other macro strategies remain in positive territory. Furthermore, the commodities benchmark has the greatest volatility, both over the three-year horizon (4.83%) and the five-year horizon (7.09%), resulting in negative Sharpe ratios in both the three- and five-year periods.

While macro strategies funds have not seen the highest returns of all of the hedge fund strategies, they remain a highly sought-after fund type, likely due to their higher liquidity, lower volatility and lower correlation to equity markets. However, with commodities funds continuing to disappoint, it will be interesting to see how fund launches and performance are affected over the coming year, especially given slowing growth in China and the volatility seen in commodities markets.

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