Bets on lower interest rates fueled the profits of hedge fund managers, including Caxton Associates of Andrew Law and former Moore Capital whiz Greg Coffey, in a chaotic market period.
London-based Caxton of Mr. Law, one of the world’s oldest and best-known funds, has gained more than 3% in its main global fund since the start of last week, bringing returns this year at 7%. A portfolio managed solely by Mr. Law also benefited and is up 8% this year.
Coffey made 5.2% gain last month at New York-based Kirkoswald Capital Partners, the hedge fund he created in 2018 after retirement, said two people who had seen the fund’s performance. .
Like a number of macro-traders – the fund managers who bet on movements in bonds, currencies and stocks – both Mr. Law and Mr. Coffey bet on rising bond prices. These assets were lifted in anticipation of further easing of central bank monetary policy to combat the economic damage caused by the coronavirus, and as investors sought refuge from the stock market crash last week.
Two-year Treasury bill yields fell from 1.35% last week to 0.83% on Monday, and fell briefly below 0.75% following the surprise drop of 0.5 percentage points interest rates by the US Federal Reserve on Tuesday. Yields fall when prices rise.
Meanwhile, yields on the 10-year US Treasury bill dropped from 1.47% last week to a low of 1.02% on Tuesday.
“With fears of a recession in the air, bond-holding funds have performed well,” said Amin Rajan, chief executive officer of the consultancy CREATE-Research. Equity funds, however, “are going through a torrid period”.
The earnings bring Mr. Coffey, who manages nearly $ 2 billion in assets, to more than 6% this year. Last year, it posted returns of 28%.
Volatility-based funds have also won. The Vix index – known as the stock market “fear gauge” – fell from 17.1 percentage points last week to almost 50 at a stadium last week. During this week, the S&P 500 fell 11.5%, although it has recovered about 2% so far this week.
Greenwich, Connecticut-based One River Asset Management posted a 17.2% gain last week in its long volatility fund, taking this year’s gains to around 14.5%. Its computer-driven Dynamic Convexity fund achieved 7.8% last week, bringing this year’s earnings to 8.2%.
The gains come at a testing time for hedge funds, many of which have bet on rising stock prices. Equity hedge funds fell 3.8% on average in February, according to the HFR data group.
Among the funds that have been affected are computer managed funds that capitalize on market trends and trends. Aspect Capital, which achieved 20% last year, lost 4.3% last week, according to figures sent to investors and seen by the Financial Times, reducing earnings this year to 0.6%. The fund lost money by betting higher stock prices, but went backwards with its bond positions.
Man Group’s $ 4.1 billion AHL Evolution fund, which focuses on niche market trends such as emerging market interest rate derivatives and German energy, fell 3.8% on last month, which means it’s down 3.9% this year. Its $ 6.3 billion Dimension fund, which uses machine learning and other techniques to trade volatility, stocks and other assets, lost 3.7% last month and fell 3.4%. this year.