As Mark Enman, who oversees research on global macro hedge funds for Man Investments, put it: "It's been a very difficult period." In the first half of 2011, the HFRX Macro Index fell 2.1 percent. (Coincidently, the HFRX Global Hedge Fund Index fell by the same amount.) By comparison, equity markets around the globe provided positive returns. For example, the S&P 500 Index returned 6.0 percent and the MSCI EAFE Index returned 5.0 percent. In addition, bond indices were providing positive returns.
Guillermo Osses, a managing director at HSBC Global Asset Management, blamed the problem on "range trading, with very low liquidity." Nice excuse. We can only wonder what excuses were being offered in 2010, when the HFRX Macro Index lost 1.7 percent, while the S&P 500 gained 15.1 percent. Or, what excuses were offered in 2009, when the HFRX Macro Index lost 8.8 percent, while the S&P 500 gained 26.5 percent.
We can hear the talking heads repeating the same lame excuses, never admitting they simply got it wrong and that their "crystal balls" are just as cloudy (though far more expensive) as yours. Of course, doing so would be committing economic suicide -- something they aren't likely to do without a shove. When they get it right (like in 2008, when the HFRX Macro Index returned 5.6 percent versus a loss of 37 percent for the S&P 500), they take full credit for their brilliant analysis. But when they get it wrong, it's always because of some unforeseen event, some surprise or some market condition. Do that often enough, and you might even convince yourself you're a genius!
In case you interested, for the period from 2008 through the first half of 2011, the HFRX Macro Index lost about 7 percent, underperforming the S&P 500 by about 4 percent. Such evidence is why many consider macro funds to not even be investments, but compensation schemes designed to transfer assets from your wallet to the wallets of the purveyors.
Photo courtesy of WATERBOYsh on Flickr.
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