01 07 2018 | by Victor Xing | Capital Markets
12 04 2017 | by Victor Xing | Central Banks
Bond market term premium and wolves of Yellowstone
10 17 2017 | by Victor Xing | Capital Markets
How we learned to stop worrying and love the “fake markets”
09 20 2017 | by Victor Xing | Central Banks
QE’s distributional effects a rising political liability
04 18 2017 | by Victor Xing | Capital Markets
Persistent low volatility threatens active fund managers
02 17 2017 | by Victor Xing | Economics
Looming risks through the prism of bifurcated housing market
01 11 2017 | by Victor Xing | Economics
Financial risk contagion: China’s capital outflow
12 22 2016 | by Victor Xing | Economics
November PCE: dollar strength weighed on goods inflation
12 14 2016 | by Victor Xing | Central Banks
A less-hawkish interpretation of the December FOMC
12 02 2016 | by Victor Xing | Economics
November Payrolls and Governor Powell on risk management
11 11 2015 | by Victor Xing | Capital Markets
What is behind some global macro funds’ poor performance?
A number of global macro funds have participated and subsequently capitulated from various crowded positions in 2014 and 2015
- One of the most consistent macro positioning has been short Treasuries (the hawkish FED trade). This position was devastated in 2014 as long-end of the curve led the bull flattening (30yr sector rallied more than 2 year or 5 year part of the curve) in response to global commodity rout and ECB QE. China growth worries and further energy whipsaw again punished those who shorted rates. When bull flattener positions became popular amongst macro funds (long 30 year part of the curve), they were again crushed by FED’s repeated dovish stance at the March, June and September 2015 FOMC meetings (dovish FED induce curve steepening, where front-end of the curve rally more than long-end). Too many macro funds (especially macro hedge funds) got this wrong.
- Many funds loaded up on High Yield and increased credit risk exposure. This fared poorly during the oil crash, as many High Yield issuers are in the energy sector.
- High-carry EM currencies. This is also a oil story. EM economies dependent on energy were punished during the oil crash, and their currencies with good carry profile also weakened vs. the dollar or Euro. Macro funds’ returns were hurt as a result.
Next article11 10 2015 | by Victor Xing | Capital Markets