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In the week ending June 30th 2023, the HFR Asian Hedge Fund Industry Report said that Japanese and Emerging Markets hedge funds extended gains to begin 2023, driven by optimism toward peaking U.S. and global inflation, and the near end of the US-led interest rate increasing cycle. Asian currencies, including the Japanese Yen and Chinese Yuan, fell to historic lows against the US Dollar, driving strong gains in the Nikkei; the HFRI Japan Index advanced +1.8 percent YTD through May. Similarly, the HFRI 500 Emerging Markets Index added +1.3 percent YTD through May, with gains across Equity Hedge and Cryptocurrency exposures.

Many macro hedge funds that bet on global economic trends are ending the first half of 2023 with losses, but uncertainty around how different central banks will handle monetary policy could provide trading opportunities for the rest of the year.

Meanwhile, for hedge funds, the second half of 2023 is all about pouncing on the ways in which inflation, aggressive rate hikes and decarbonisation are shaping the economy. Major central banks have collectively raised rates by more than 3,750 basis points since September 2021, and while the pace has eased, the world economy has yet to feel the full effect. Four prominent funds shared their ideas using four different asset classes to trade on this uncertainty.

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