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INDEX TRACKER

Global Macro Proves Mettle in H1

With the dust settled on the first half of the year, global macro has emerged as the second best performing hedge fund strategy after fixed income arbitrage, according to Credit Suisse data. Managed futures made back the losses from earlier in the year but did not sustain the gains, ending up about flat for the first six months.

Global macro outperformed relative to the broad index, which tends to occur when there is a big rise in volatility, says Boris Arabadjiev, chief investment officer at Credit Suisse’s fund of hedge funds group. The strategy has desirable characteristics for the current environment and is one of the strategies usually better able to exploit volatile markets, he said.

Stock, bond and commodity markets posted losses in H1. Both global macro and managed futures, as well as hedge funds as a whole, beat the markets (table).

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January through June 2010 Performance

Selected Credit Suisse Hedge Fund Indexes
 

               
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Investors apparently agree that global macro is a good strategy for this environment, judging from asset flows. Global macro received close to $10 billion new capital in the first half of the year. This was the largest inflow among hedge fund sectors, half of which had net outflows during the period.

Money moved also to fixed income arbitrage and event-driven strategies, but in smaller amounts. By contrast, managed futures assets were flat.

Credit Suisse reported that hedge funds as a whole had a slight outflow in the second quarter. Total industry assets are at $1.5 trillion, well below their peak before the massive wave of redemptions in 2008 and early 2009.

Macro funds had low correlation to global equities in the first half of the year. This is a most desirable characteristic, Mr. Arabadjiev says, but the strategy’s relation to markets, or beta, is nonsystematic-meaning it is sometimes high and sometimes low. However, he sees global macro returns compounding nicely because the downside is limited while nimble managers keep more of the upside.

Returns and asset numbers vary across databases because of differences in constituents and the methodology used.