Challenging trading conditions have forced Soros Fund Management to take a step back from macro investing, a strategy that played a key role in the firm and its founder, billionaire George Soros’s, success for several decades.
People familiar with the matter told Bloomberg that Dawn Fitzpatrick, chief investment officer at Soros, has been cutting back on trades that seek to profit from big moves in currency, bond and commodity markets over the past year, due to fewer opportunities. Difficulties interpreting macroeconomic trends and how these influence asset prices led Fitzpatrick to withdraw money from external macro managers and cut allocations to the firm’s internal team after they lost between 4% and 5% on trades this year. Several members of Soros’s macro staff, including Nuno Camara, who managed money in emerging markets, and Timothy Durnan, a macro trader, were also reportedly let go earlier this month.
Fitzpatrick’s orders have left Adam Fisher, the person responsible for overseeing macro investing at Soros, with just $500 million set aside for macro wagers, down from about $3 billion last year. Sources added that allocation could increase in the future if the trading environment becomes more favorable.
Soros Fund Management is etched in investment history for its well-timed macro wagers. In 1992, the firm’s founder Soros and his chief strategist Stanley Druckenmiller rose to fame after making $1 billion shorting the British pound.
Soros’s success as a speculator inspired a generation of traders to follow suit. However, in recent years hedge funds have struggled to replicate previous triumphs, a factor that they blame on lower levels of volatility across markets.
Druckenmiller, who worked for Soros from 1988 to 2000, complained to Bloomberg that opportunities for macro wagers are now drying up. “I made 30% a year for 30 years,” he said. “Now, we aren’t even in the same zip code, much less the same state.”
Bloomberg confirmed that many macro funds have produced sub-par returns in recent years, including PointState Capital, a $10 billion firm run by traders who once worked for Druckenmiller. PointState reportedly lost 12% through November.
Still, a select few macro funds did manage to come up trumps in 2018. According to Bloomberg, billionaire Alan Howard generated 37% in May alone, while Jeffrey Talpins' Element Capital Management posted a 26% return through November, indicating that some investors are still able to make money forecasting big economic trends.