Trend following macro fund stays afloat thanks to discretionary layer

Ray Carroll Here is a macro, trend following hedge fund that has not been doing too badly in its nearly three-year existence. The managers attribute its sound performance to their taking over risk and trading once the program has identified trends.

Breton Hill Master Fund LP returned 0.93% in February, a month when the equity markets were volatile, U.S. numbers were weak, emerging market concerns receded slightly (though Ukraine gave rise to some concern) and commodities experienced large price fluctuations due to weather surprises. That month, the macro fund, which invests long and short in equities, commodities futures, financial futures and currencies, increased its long posture across equities and commodities.

According to the fund's monthly report, the managers look for a rebound in economic data, a continuation of the bull trend in stocks; they remain nimble and are wary of escalating knock-on effect from emerging markets.

The $219m fund, incepted in August 2011 and run by Breton Hill Capital out of their Toronto offices, is down -4% YTD, after returning +10.3% in 2013, +3.45% in 2012 and -3.44% in 2011.

Trend following is an investment strategy based on the technical analysis of market prices, rather than on the fundamental strengths of the companies.

Trend following funds, or CTAs, did much better than the average hedge funds and were even in positive territories in 2008. Because of that, between 2009 and 2012, investors, including pension funds, poured some $130 billion into such funds, according to Quartz, and a record of 187 of these funds launched in 2012. Unfortunately, by that time the profits had already started to evaporate. Most programs could not take advantage of a general ......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.