MACRO HEDGE FUND MANAGERS KNOW THE MARKETS can be a
cruel mistress. Just ask Louis Bacon. This past summer Bacon, a
top macro investor and founder of New Yorkbased hedge
fund firm Moore Capital Management, announced that he was
returning $2 billion 25 percent of Moores
capital to clients. He also said he was moving money out
of macro, a strategy that seeks to exploit big-picture economic
trends and global capital market events, because he wasnt
comfortable taking much risk in the current
environment. Nowadays, central banks and policymakers drive the
markets and fundamentals play a diminished role.
Bacon has called his 2012 results disappointing. As of
mid-November his flagship, $4.6 billion Moore Global
Investment Fund, had returned just 3.72 percent on the year.
But thats a relatively strong performance. Global
diversified macro funds gained an average of 1.62 percent
during the same period, according to HSBC Holdings
alternative-investment group, compared with 14.28 percent for
the Standard & Poors 500 Index. And its not
just macro hedge funds that are struggling: Year-to-date
through October 31, the HFRI Fund Weighted Composite Index had
gained only 4.33 percent.
A new crop of hedge fund managers believe they can make
money in todays challenging conditions, even if they
dont agree on how to do it. Take Infineon Capital
Management, a New York shop being launched by Imran Hussain and
Mead Welles. The pair combine macro and relative-value
strategies, investing across asset classes and markets with a
focus on emerging economies, where they see more growth
potential than in debt-burdened developed markets.
The characteristics of the crisis in the developed
world are very much emerging-market-like in nature and not well
understood by G-7 [market] participants, says CIO
Hussain, previously head of emerging-markets debt portfolios at
$3.5 trillion, New Yorkbased investment firm
BlackRock. Their investment frameworks did not anticipate
the potential for zero-interest-rate policies and asset price
targeting mechanisms by central banks, he adds. We
are witnessing economic distortions on an epic scale, and this
tale is far from over.
Hussain and Welles met when they were traders at Cargill
Financial Services International, the emerging-markets
investing arm of U.S. commodities giant Cargill. Before
launching Infineon, Welles spent more than a decade running
Octagon Asset Management, a New York hedge fund firm
focused on asset-backed lending.