Hugh Hendry's Eclectica Asset Management Said To Close

toc said:
Macro betting market timers are not among the asset classes that offer diversification. Commodity, futures, internationals do that pretty well.
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That's not true. Global macro guys have historically had very little correlation to passive equities.
 
Maverick74 said:
https://www.macrobusiness.com.au/2017/09/hugh-hendry-shuts-eclectica/

This is an excellent summary of his thoughts and I for the most part agree with them. It's well worth a read. I won't paste the whole thing here but this part is pretty blunt and to the point:

"But it is bad news for me because funds like mine are required to demonstrate negative correlation with risk assets (when they go up like this I go down…), avoid large drawdowns and post consistent high risk adjusted returns.

Oh, and I forgot, macro fund clients don’t like us investing in the stock market for the understandable fear that we concentrate their already considerable risk undertaking. That proved to be an almighty puzzle for a fund like mine that has been proclaiming the stock market as a “safe-ish” bet ever since 2013."

It's really tough right now in general for global macro funds. Their demand does not come from people seeking long equity exposure, they can get that easily in a passive index fund. These funds try to look around the world and find trouble, since trouble is usually not correlated with the long and strong equity crowd. But if there is no trouble or dislocations to be found, these funds tend to flounder and generate low to negative returns. Like trend following right now, this is a tough space to be in unless you are just going to index your clients money and tax them on their wealth which is what most charlatans do in this industry. Hey, it makes the wife and kids happy.
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I don't get it. Macro offers the widest range of opportunities with sufficient liquidity to go long or short. It's not large-cap Japanese equities strategy with 100% invested and no hedging allowed constraints where you're at a mercy of broad market movements or Swiss STIR trading where market is essentially dead (still I would not blame SNB because keeping swiss STIR traders employed is not part of their mandate). Single theme, binary betting on global risk-on/risk-off and saying this year it's risk-on suggests lack of creativity.

Likewise, trend followers should find stuff that trends. If they cannot do it and blame it on range-bound markets, then why should client give them money instead of buying OTM options that would do well in a big trend? There is a lot more value in recognizing a trend than implementing a trade within a trend.

In Eclectica case it's hard to believe that investors bullied the fund into running negative correlation and losing money on purpose in bull markets. If they were bullish on equities, why did they lose 9.8% YTD anyway?
 
Eurokopek said:
I don't get it. Macro offers the widest range of opportunities with sufficient liquidity to go long or short. It's not large-cap Japanese equities strategy with 100% invested and no hedging allowed constraints where you're at a mercy of broad market movements or Swiss STIR trading where market is essentially dead (still I would not blame SNB because keeping swiss STIR traders employed is not part of their mandate). Single theme, binary betting on global risk-on/risk-off and saying this year it's risk-on suggests lack of creativity.

Likewise, trend followers should find stuff that trends. If they cannot do it and blame it on range-bound markets, then why should client give them money instead of buying OTM options that would do well in a big trend? There is a lot more value in recognizing a trend than implementing a trade within a trend.

In Eclectica case it's hard to believe that investors bullied the fund into running negative correlation and losing money on purpose in bull markets. If they were bullish on equities, why did they lose 9.8% YTD anyway?
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There maybe a wide range of products but not a wide range of opportunities. Most global macro guys are clustered in the same trades. Trend followers have the opposite problem. They are usually in many trades at the same time. The problem there is the bad ones usually offset the good ones in a choppy market. I'm attaching below the Barclay Global Macro Index which is a composite of 109 global macro funds. As you can see, not very sexy.
 

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