Macro Funds 2024 Returns
Seems like macro funds (Discovery, Deshaw, Rokos) are having a banner year +30% YTD How are they up so much this year?
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Based on the most helpful WSO content, macro funds like Discovery, D.E. Shaw, and Rokos are thriving in 2024 due to several key factors:
Volatility and Policy Shifts: The current environment is marked by significant volatility, slow or zero-growth periods in the U.S., and global policy dispersion. These conditions create opportunities for macro funds to capitalize on market inefficiencies and trend shifts.
Big Data and Quantitative Tools: Many macro funds have heavily invested in quants and data scientists to analyze global data, such as retail sales, inflation, employment, and commodity demand. This allows them to make more informed and precise trades.
Geopolitical and Economic Disruptions: Events like geopolitical conflicts, post-COVID economic adjustments, and central bank policy changes have created a fertile ground for macro strategies to outperform.
Flexible and Quantamental Approaches: Funds are increasingly adopting a "quantamental" approach, blending quantitative and discretionary strategies to adapt to rapidly changing market conditions.
Experienced Leadership: Many of these funds are led by seasoned managers who have successfully navigated previous market cycles, giving them an edge in exploiting current opportunities.
These factors combined have allowed macro funds to deliver exceptional returns, such as the +30% YTD performance you mentioned.
Sources: Global Macro's Future "Stars" - Where Are They Coming From?, For love of the game, Rosy Earnings, Mid-Week Reversal | The Daily Peel | 8/4/22, Global Macro Future "Stars" - Where Are They Coming From?, Macro HF Interviews: Paul Tudor Jones, Louis Bacon and Bruce Kovner
Well Rokos did make 1B from the US election results which would justify part of their return.
Seems apart from the US election predictions, I've heard that macro hedge funds haven't performed on the directional side and that relative value strategies (RV) has lead the way on profits.
Apart from US election predictions, I've heard macro guys including Brevan lost money and laid lots of people off for mistiming fed rate cuts starting due to OPEC extending oil production cuts.
Hopefully this directional strategy picks up as there is an abundance of opportunities in this space moving forward due to geopolitical tensions.
What types of RV strategies have been generating profits?
As an RV macro trader it always baffles me how these discretionary directional guys think they have edge.. here's how they describe their 2024.. omg there's nothing to do for the first 9 months (excuse for losing money) let's go balls to the wall risk on on the Trump trade because yolo and all my friends are doing it.. wow Trump won I made lots of money I'm a genius
Honestly directional macro is such a farce it's a classic coin flipping martingale strategy where these guys take 1-2 big consensus bets a year and think their geniuses when they're right and get blown out when they're wrong. For the few Brevan, rokos, soros types of funds that have survived people forget about the hundreds of ones that were on the wrong side of the martigale betting strategy (light sky, graticule, paulson, moore, clarium etc.)
The edge is usually from backtesting independently sourced data that gets released prior to macro data publications with strong correlations, as well as from sourcing information from different independently verified publicly available news articles that have not yet been priced in.
Directional macro strategies should have performed so much better these past 2 years from trends a lot of these guys failed to spot due to the geopolitical volatility we have experienced. Kind of shows just how outdated these "experts" are who have no idea how to trade these volatile events.
It's been a while since I heard anyone mention Clarium!
I struggle a lot with directional discretionary macro people as well (and I am a one!). Its pretty clearly a lower Sharpe ratio approach to markets, but with massive capacity and very low costs. For what its worth - everyone who I have ever met in the space who is pretty good tends to engage in some degree of RV risk-taking.
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Mind if I DM you?
Honest question: what do you mean by "RV macro trader"? Able to give example of your mandate/types of products you trade?
Are you doing one/some of: vol RV, swap rv, bond rv, bond basis (not sure how much RV this is), asset swap (heard some people describe outright asw as rv....), xccy / basis trades?
Apologies this is a bit off-topic but do these "discretionary directional" funds largely even exit any more? It seems it's not really a thing anymore on a non-quant basis. I'm asking as someone in IB who wants to move to the Macro HF world but is only getting HH inbounds from pods.
RV type strategies have become more popular in macro space but directional discretionary still exists
They only want quantitative macro traders from banks/other funds, IB would be very out of the norm
Go trade rates at a bank for a couple y and u can get a book at a pod
May I ask for the math requirement on the Macro rv trading? Many thanks!
When you say 30%, is that including or excluding leverage? 30% on 5x leverage means they’re only achieving 6% - how do they still get paid millions to manage people’s money. Echoing above, it seems like they just went balls deep on the Trump trade and overlevered.
I know L/s equity hedge funds typically leverage 4-5x, is that the same on the macro side? Is it more/less??
Why does leverage matter? Investor gives you $100, if you lever it up (to bet big on one thing, to diversify and have many bets, to go L/S, etc) and achieve 30%, the investor doesn’t care that it was levered 3,4 or 5x. Leverage does not mean one bet but juiced up, leverage just means investing more than the $100 given. So if you want to bet on bonds, equities, commodities, etc in a way that you think is going to give you a diversified bet, that doesn’t mean that leverage is adding risk, it can actually be reducing risk in many scenarios.
Druckenmiller has done well? Even if FO
What is pay structure/pay like at macro funds before PM level? How does it compare to trading on the sell side in a strong macro vol product?
It’s fund/PM dependent. Some funds will want you to get paid less or index to sell side because they think they’re providing a learning opportunity. Weak PMs/firms usually make this argument. (I am not making enough money to pull you so I will dangle an intangible in front of you). The better opportunities typically pay more than the banks because they realize talent is hard to come by and they will bid for it.
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