The returns were made in a month that was characterised by extreme volatility following the downgrade of the US credit rating, and to put the returns in context, dedicated short funds made a whopping 6.94%. It is not clear exactly what contribution FX made to the returns of the macro funds. Markets in August saw a huge spike but a quick recovery, with the month ending close to where it started. Among the big casualties of that spike was the carry trade, as low yielding currencies got bought and investors fled from the risk currencies.
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| Source: HFRI |
The fortunes of managers trading FX depend in large part upon how they reacted when there was a large move in carry trade positioning: For hedge funds that were wrongly positioned for the initial move and then repositioned for a continuation of the carry unwind, would have been hit a second time when the trend reversed. Funds with longer time horizons that did not react probably ended the month flat. Those not in the carry trade that found themselves on the right side of the moves and who got out at the right time will have posted big returns.
According to BarclayHedge index data, the contribution of FX to macro funds and CTAs, which also derive a proportion of their returns from FX markets, might not have been positive. According to the data so far available, CTAs made a modest 0.21% in August, but among the CTA sub-indices, currency traders made a loss of just over half a per cent.
However, it may be misleading to draw conclusions from this: “Although one index has gained and the other has lost, the differences in return, in my opinion, are too small to draw any conclusions,” said Sol Wakman, president of BarclayHedge. The 0.8% loss made by the 72 global macro funds having reported to BarclayHedge for August also look relatively modest when compared with the more than 5% monthly drawdown registered among emerging markets funds, or the 3.2% loss for event driven funds.
The Dow Jones Credit Suisse Index publishes its numbers for August next week.