Industry Updates

Volatile currencies caused significant losses for larger hedge funds

Thursday, May 26, 2011

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Opalesque Industry Update – Since the beginning of 2011, some of the largest hedge funds on a global scale have lost money from volatile currencies.

A report by The Wall Street Journal identified the hedge funds as the $2.5bn fund managed by Geraldine Sundstrom for Brevan Howard Asset Management LLP, an $8bn fund run by hedge-fund giant Tudor Investment Corp.; Caxton Associates' $5bn Global Investment Ltd. fund; and New York-based Moore Capital Management's $7.5bn Moore Global Investors fund.

Ron DiRusso, portfolio manager at the $8bn New York based currencies hedge fund FX Concepts told The Journal, "It's been a tough environment. The market goes in one direction for about three weeks, and everyone goes after it, and then it flips around. That's hurting people."

An independent study released by hedge fund data provider Hedge Fund Research showed that macroeconomics funds, which bets on currencies and global events, posted a negative 0.8% returns as at end May 19, 2010. For May, macro funds retreated 3.18%, HFR added.

The negative performance of currencies is a result of a decline in the global financial markets. But insiders are still unsure if the current debt problem in Europe and the perceived slow down in global economies will wipe off the gain in the past two years. Many believe that the uncertainties in the global economy are pushing currencies down. Data from HSBC also showed that Brevan Howard's Emerging Market Strategies Fund Ltd. declined 4.2% as of May 6, are posting a 2.7% negative growth as of Feb. 11. The Tudor B.V.I. Global Fund Ltd., managed by Paul Tudor Jones also fell 0.3% as of May 13 after registering a 1.9% rise on March 9.

Andrew E. Law’s Caxton Global Investment Ltd. fell 3% as of May 17 after registering a 0.5% loss on March 8.

Meanwhile, Moore Capital's flagship Moore Global Investments fund, run by Louis Bacon, was down 1.4% as of May 5, according to a source familiar with the fund. The firm's $3.8 billion Macro Managers Fund had lost 0.7% and one of Moore Capital portfolio manager Greg Coffey's funds deepened its losses from 4.1% on Feb. 28 to 5.8% as of May 5. The majority of foreign-exchange traded funds have been experiencing lows for the past several months as the Euro fell 6.5% against the U.S. dollar between May 4 and May 23. The rise of the Japanese yen by 4.6% immediately after the powerful Mach 11 earthquake and tsunami also spelled bad returns for the strategy.
- Precy Dumlao

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