Macro funds were supposed to have turned a corner in 2017, finally finding a way to bring in significant returns after years of struggling. At this point, though, nearly a quarter of the way through the year, they have in general not managed to achieve those goals. According to Bloomberg, discretionary funds climbed by just 0.3% from the beginning of the year through February, and average funds rose just 2.2%. Many funds not only failed to meet the global stock market growth levels, but also came in significantly short. So what has happened to these funds, and why might they be continuing to struggle?

Trump Administration and the Fed

According to Darren Wolf, the head of hedge funds for the Americas for Aberdeen Asset Management, "the perception was that once Trump got elected, there would be a more hawkish tone to the Fed." Wolf indicated that "divergence in global policy between what the U.S. is doing and what the rest of the world is doing is normally a favorable macro backdrop." Unfortunately for macro funds, though, it hasn't been that way so far this year. First, the changes have been marginal up until now. Policy proposals have pushed markets higher, and there has been little by way of major reforms in U.S. policy on trade or taxes. The Trump rally has been a boost to the U.S. market, but it has not translated to easy success for macro fund managers.

U.S. Bonds and Foreign Exchange Make Things Difficult

In other cases, macro funds have been slighted by bets against U.S. bonds. Bonds began to rise in price late in February, putting those funds down in the process. Foreign exchange has similarly been tough on macro investors. According to head of research for Track.com, Robert Savage, most of these funds "are still long the U.S. dollar but don't have much to show for it." Further, many macros sustained losses in the circumstances surrounding the Japanese reflation. According to Wolf, these funds "made a lot of money on this trade in the fourth quarter [of 2016] and gave it back in early 2017." At the same time, fund managers seem to have been contributing to their defensive positions, while many of them still retain confidence that an inflection point is pending.

All that being said, investors seem to still have faith in macro funds. A Deutsche Bank survey from last week indicated that 27% of allocators intended to add more investments to macro strategies. Perhaps this is due to those standout macro funds which have managed to outperform the markets, including Robert Gibbins' Autonomy Capital, a $4 billion fund which gained about 9% in 2017 so far.

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