Macro Strategy report | February 2021

Overview Strategy vs benchmarks Top 10 league tables Billion-dollar club league tables Emerging manager league tables Investor flows and sentiment Key trend analysis: Inflation a looming threat for macro managers

All data as of 26 March 2021

Macro managers to the fore as inflation concerns weigh

HFM’s Macro Composite returned to positive territory in February, with a 1.6% gain. But having outperformed Macro performance tracker | YTD 2021 vs total 2020 the wider fund industry in 2020, the index trails 18% the HFM Composite year-to-date, 0.9% to 4.1%, due 16% largely to strong returns among equity funds. 14% 12% Inflation watch 10% Several brand names have started the year strongly, 8% including funds from and SPX 6% Capital, and are well placed going forward. Many 4% investors are now looking to larger macro managers – 2% 0.9% 1.5% firms with expertise in building portfolios around 0 13.4% 12.2% 16.3% 4.1% interest rate trends and inflationary impact – to help 2020 total YTD through Feb-21 them navigate an environment where inflation is fast becoming the primary concern of central banks and HFM Macro Composite HFM Global Composite S&P500 politicians. Lenience on inflation may be part of the Biden Administration’s monetary policy, but it is also premised on the unproven conviction that any US recovery will necessarily lead the global recovery. Macro flows tracker | YTD 2021 vs total 2020 And investors' concerns are continuing to translate into macro commitments. Macro funds saw inflows of 10 $4.6bn across the first two months of 2021. This 0 $15.2bn followed a similarly positive end to 2020, where -10 -$22.4bn -$51bn $4.6bn November and December saw net flows of $10.0bn to macro funds, accounting for almost a third of all hedge -20 n b fund strategy allocations. Overall, hedge funds have $ -30

seen net flows of $15.2bn in 2021 through February. -40 -50 OVERVIEW -60 A robust start to 2021 for macro funds, fuelled 2020 total YTD through Feb-21 by investor expectations of enduring global price dislocations from lingering lockdowns, Macro funds All hedge funds vaccine rollout and commodity price volatility. 01 Macro | performance

Access HFM A mixed start to the year sees macro managers fall behind the wider industry on a 3-year annualised basis. Performance data

HFM Macro Composite vs benchmarks | past 12 months and rolling 3yr annualised

Performance | past 12 months return (%) Performance | rolling 3yr annualised return (%)

HFM Macro Composite HFM Global Composite S&P 500 HFM Macro Composite HFM Global Composite S&P 500 30 13 12 25

) 11 %

20 ( 10 n r ) u t % 15 9 (

e r

n r

d 8 u

10 e t s e i l r

7 a d 5 u n

n 6 u n o a

p 0 r 5 y m 3 o 4 g C -5 n i l l 3 o

-10 R 2 -15 1

0 0 0 0 0 0 0 0 0 0 0 1 * 0 0 0 0 0 0 0 0 0 0 1 * 2 2 2 2 2 2 2 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 1 - - - - - l------2 - - - - l------2 b r r y n u g t v c n b r r y n u g t v c n b e a p a u J u c o e Ja e a p a u J u c o e Ja e F M A M J A Sep O N D F M A M J A Sep O N D F

Benchmark Feb-21* Jan-21 Dec-20 2021 YTD* 2020 2019 12-month* 3yr ann.* HFM Macro Composite 1.6 -0.7 3.0 0.9 13.4 7.2 14.1 6.6 HFM Global Composite 2.9 1.1 3.5 4.1 12.2 9.8 18.8 7.4

S&P500 2.6 -1.1 3.7 1.5 16.3 28.9 29.0 12.0

Source: HFM data. *Data from funds to report last month's performance to HFM at the time of publication.

Top 10 macro funds

Top 10 macro funds | past 12 months and past month Fund Firm Past 12 months % Feb %* 1 Crescat Fund LP Crescat Capital LLC 88.2 -0.7 2 MLM Macro - Peak Partners, L.P. Mount Lucas Management LP 76.8 10.2 3 Bovell Global Macro Fund SP USD Bovell Global Macro 73.0 6.8 4 Gemsstock Fund Gemsstock Ltd 56.1 9.2 5 Caxton Global Investments, Ltd. Caxton Associates 41.4 3.9 6 Bodhi Tree Tactical Allocation Fund, LP Bodhi Tree Asset Management, LLC 32.4 -5.5 7 EDL Global Opportunities Fund Ltd EDL Capital 31.8 4.4 8 Friedberg Global Macro Ltd Niagara Capital Partners Ltd. 31.1 7.9 9 HonTe LH Macro Onshore Fund, LP HonTe Advisors 28.1 -11.1 10 Sandpiper Global Macro Program Sandpiper Asset Management 26.5 20.4

Top 10 macro funds | 3yr annualised and past month Fund Firm 3yr annualised % Feb %*

1 NEXT- Alpha Growth Capital 25.9 -1.1 2 Haidar Jupiter Fund LLC Haidar Capital Management 24.8 12.9 3 Crescat Global Macro Fund LP Crescat Capital LLC 21.3 -0.7 4 Caxton Global Investments, Ltd. Caxton Associates 20.4 3.9 5 AIP Convertible Private Debt Fund LP - Class A AIP Asset Management 19.4 3.0 6 Gemsstock Fund Gemsstock Ltd 16.2 9.2 7 Fund - USD Brevan Howard Asset Management LLP 15.6 0.2 8 Massar Macro Commodity Strategy Massar Capital Management 15.2 3.2 9 AG Capital Select SNN Retail Hedge Fund IDS Management Company (RF) (Pty) Ltd 10.3 4.1 10 EDL Global Opportunities Fund Ltd EDL Capital 10.2 4.4

Source: HFM data. *Data from funds to report last month's performance to HFM at the time of publication. 02 Macro | BDC managers

Access HFM Haidar Capital's Jupiter fund leads the way among brand-name products, with a 17.7% YTD return. Brand-name trackers

Brand-name firms performance tracker | YTD returns

Selected funds from managers with AuM >$1bn on the HFM platform. Funds selected by HFM analysts at the start of 2021 with emphasis placed on flagship and larger products. Includes <$1bn funds.

Fund Fund strategy Firm Firm location YTD % 3yr ann. % Data as of 1 Haidar Jupiter Fund MS (H) Haidar Capital Management US 17.7 24.8 Feb-21

2 Gemsstock Fund GL Gemsstock UK 9.0 16.2 Feb-21

3 SPX Eagle EM SPX Capital BR 8.9 5.1 Feb-21

4 Caxton Global Investments MS Caxton Associates US 4.5 21.0 Feb-21

5 EDL Global Opportunities Fund GL EDL Capital SWI 4.2 10.2 Feb-21

6 Massar Macro Commodity Strategy GL Massar Capital Management US 3.9 15.2 Feb-21

7 Arete Macro Fund AP Ocean Arete HK 3.2 6.7 Feb-21

8 MKP Opportunity Master Fund GL MKP Capital Management US 2.1 4.5 Feb-21

9 Brevan Howard Fund GL Brevan Howard Asset Management UK 1.4 15.6 Feb-21

10 Ortus Aggressive Fund (Cayman) GL (S) Ortus Capital Management HK 1.1 13.8 Feb-21

11 Bridgewater Pure Alpha GL (H) US -0.4 -1.0 Feb-21

12 Graham Quant Macro GL (S) Graham Capital Management US -0.8 8.7 Feb-21 Astignes Asia Rates Master Fund AP Astignes Capital Asia HK -0.8 5.3 Feb-21 13 Episode GL M&G Investments UK -2.6 2.9 Feb-21 14 Bridgewater All Weather @12% GL (H) Bridgewater Associates US -3.6 6.1 Feb-21 15 Pharo Macro Fund EM UK -4.6 3.2 Feb-21 16 Pharo Gaia Fund EM Pharo Management UK -4.9 4.3 Feb-21 17 IPM Systematic Macro Fund GL (S) IPM Informed Portfolio Management SWE -6.1 -4.3 Feb-21 18 Penso Global Macro Opportunities (GMO) GL Penso Advisors US -6.4 0.2 Feb-21 19 Systematica Macro RV Fund MS (S) Systematica Investments JER -7.2 -3.4 Feb-21 20

Analyst note: For fund strategy: GL = Global-focused, AP = Asia-focused, EM = emerging markets-focused, MS = multi-strategy. Where brackets: S = Systematic approach, H = Hybrid approach.

Source: HFM data

Billion dollar fund performance

Performance for $1bn+ funds | past 12 months and past month Fund Firm Past 12 month % Feb %* 1 Gemsstock Fund Gemsstock Ltd 56.1 9.2 2 Caxton Global Investments, Ltd. Caxton Associates 41.4 3.9 3 Brevan Howard Fund - USD Brevan Howard Asset Management LLP 24.2 0.2 4 SPX Raptor SPX Capital 22.3 10.8 5 SPX Eagle SPX Capital 18.5 10.4 6 PIMCO Strategy (PARS) III Fund Pacific Company 10.9 0.5 7 Ibiuna Hedge FIC FIM Ibiuna Investimentos 9.9 2.2 8 Man AHL Macro SP Class A USD AHL Partners LLP 9.4 0.0 9 Graham Quant Macro Graham Capital Management 8.7 0.4 10 Graham Absolute Return, Ltd. Graham Capital Management 8.7 4.5

Performance for $1bn+ funds | 3yr annualised and past month Fund Firm 3yr annualised % Feb %* 1 Caxton Global Investments, Ltd. Caxton Associates 20.4 3.9 2 Gemsstock Fund Gemsstock Ltd 16.2 9.2 3 Brevan Howard Fund - USD Brevan Howard Asset Management LLP 15.6 0.2 4 SPX Raptor SPX Capital 9.9 10.8 5 Graham Quant Macro Graham Capital Management 8.7 0.4 6 Ibiuna Hedge FIC FIM Ibiuna Investimentos 7.6 2.2 7 PIMCO Absolute Return Strategy (PARS) III Fund Pacific Investment Management Company 6.7 0.5 8 Bridgewater All Weather @12% Trading Ltd Bridgewater Associates 6.1 -3.2 9 Bahia AM Maraú FIC de FIM Bahia Asset Management 5.7 0.4 10 SPX Eagle SPX Capital 5.1 10.4

Source: HFM data. *Data from funds to report last month's performance to HFM at the time of publication. 03 Macro | <$1bn fund s

Access HFM Crescat Capital's Global Macro Fund is the top-performing sub-billion-dollar macro product over the past 12 months. League tables

Mid-size fund performance

Performance for $250m–$1bn funds | past 12 months Fund Firm Past 12 month % Feb %* 1 EDL Global Opportunities Fund Ltd EDL Capital 31.8 4.4 2 Friedberg Global Macro Hedge Fund Ltd Niagara Capital Partners Ltd. 31.1 7.9 3 Massar Macro Commodity Strategy Massar Capital Management 25.3 3.2 4 Haidar Jupiter Fund LLC Haidar Capital Management 22.0 12.9 5 SPX Hawker SPX Capital 18.6 10.4 6 PIMCO Absolute Return Strategy (PARS) IV Fund Pacific Investment Management Company 11.3 0.3 7 Broad Reach Master Fund Broad Reach Investment Management 9.4 3.0 8 Truxt I Macro FIC FIM Truxt Investimentos 8.6 2.4 9 Cirera Capital Emerging Markets Macro Fund - Class A USD Cirera Capital 7.4 -1.6 10 Penso Global Macro Opportunities (GMO) Penso Advisors 6.6 -1.2

Performance for $250m–$1bn funds | 3yr annualised Fund Firm 3yr annualised % Feb %* 1 Haidar Jupiter Fund LLC Haidar Capital Management 24.8 12.9 2 Massar Macro Commodity Strategy Massar Capital Management 15.2 3.2 3 EDL Global Opportunities Fund Ltd EDL Capital 10.2 4.4 4 PIMCO Absolute Return Strategy (PARS) IV Fund Pacific Investment Management Company 7.2 0.3 5 Truxt I Macro FIC FIM Truxt Investimentos 6.1 2.4 6 Bahia AM FIC de FIM Bahia Asset Management 4.7 0.4 7 MKP Opportunity Master Fund MKP Capital Management, LLC. 4.5 2.4 8 Pharo Trading Fund, Ltd. Pharo Management 4.2 -3.8 9 PGIM Fixed Income Global Liquidity Relative Value PGIM, Inc 4.1 -1.6 10 PGIM Fixed Income US Liquidity Relative Value PGIM, Inc 3.5 -1.1

Source: HFM data. *Data from funds to report last month's performance to HFM at the time of publication.

Smaller-size fund performance

Performance for $50m–$250m funds | past 12 months Fund Firm Past 12 month % Feb %* 1 Crescat Global Macro Fund LP Crescat Capital LLC 88.2 -0.7 2 MLM Macro - Peak Partners, L.P. Mount Lucas Management LP 76.8 10.2 3 HonTe LH Macro Onshore Fund, LP HonTe Advisors 28.1 -11.1 4 BlackRock Global Alpha Opportunities Fund Ltd BlackRock 19.6 1.4 5 The Calvion Capital Funds Calvion Capital Management 16.2 -2.3 6 Vinland Macro Plus FIC DE FIM IE Vinland Capital 15.7 1.1 7 Gávea Fund Plus Gávea Investimentos 13.9 3.2 8 East Sea Opportunities Fund Class A East Sea Capital Management 13.2 0.5 9 Penso Global Macro Opportunities (GMO) Ultra Penso Advisors 12.8 -3.0 10 Railroad Ranch Capital Partners, LP Railroad Ranch Capital Management, LLC 12.6 7.4

Performance for $50m–$250m funds | 3yr annualised Fund Firm 3yr annualised % Feb %*

1 Crescat Global Macro Fund LP Crescat Capital LLC 21.3 -0.7 2 MLM Macro - Peak Partners, L.P. Mount Lucas Management LP 8.6 10.2 3 Kadima High Vol FIM Kadima Asset Management 7.6 1.7 4 Gávea Fund Plus Gávea Investimentos 7.1 3.2 5 BlackRock Global Alpha Opportunities Fund Ltd BlackRock 6.6 1.4 6 MKP Enhanced Opportunity Offshore Ltd MKP Capital Management, LLC. 6.3 3.4 7 Quest Multi AZ Quest Investimentos 5.2 -0.6 8 Gávea Fund LP Gávea Investimentos 5.1 2.2 9 Railroad Ranch Capital Partners, LP Railroad Ranch Capital Management, LLC 4.7 7.4 10 Kinea Arkhe Multimercado FI Kinea Investimentos Ltd 4.5 0.4

Source: HFM data. *Data from funds to report last month's performance to HFM at the time of publication. 04 Macro | investor flows

Access HFM Macro managers saw net inflows for the fourth straight month in February, albeit at a decelerated rate. Investor research

Monthly flows | past 12 months vs all hedge fund flows ($bn) Macro | MoM

Macro All hedge fund strategies 40 Feb-21* vs Jan-21 Feb-21* vs Feb-20 20 8 . ) 9 . 0 9 3 6 n

. 1 . . 3 9

. 1 1 4 b . 7 . . 7 3 6 5 7 . 5 . . $ 4 3 8 3 7 (

0 0 0 3 7 1 2 s w 7 5 2 2 3 . . . 5 o 1 1 . . 2 - fl 8 5 2 1 0

- . 7 - 4 3 . r . 5 2 2 - 4 4 - - 6 - . o

-20 7 7 - . t - - 0 s 2 1 1 - e - v n I -40 $-3.6bn $7.2bn

-60 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21*

Source: HFM data, subject to revision *data so far this month

Macro monthly flows | 2019–2021 YTD ($bn)

Year Jan Feb* Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net YTD flow

2021 4.1 0.5 - - - -Type something------4.6 2020 -2.0 -6.7 -20.2 -13 7.0 -4.8 10.8 5.3 -7.3 -1.5 3.4 6.6 -22.4

2019 -1.6 -0.2 -2.5 -0.6 -2.9 -3.9 -1.0 -8.1 -3.1 0.8 -1.0 -0.2 -24.3

Source: HFM data, subject to revision. *Data from funds to report last month's performance to HFM at the time of publication.

Macro total strategy assets | past 12 months ($bn) Macro | MoM

500 450 s

t 400 Feb-21* vs Jan-21 Feb-21* vs Feb-20 e s

s 350 a

l a

b 300

o l g

l 250 a t o t 200 y t i u

q 150 e

S

/ 100 L 50 $-1bn $74bn 0 377 323 320 331 330 414 426 410 407 428 451 452 451 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21*

Source: HFM data, subject to revision. *Data from funds to report last month's performance to HFM at the time of publication.

Investor allocation plans for macro | H1 2021

6% 6% 13% 0% 27% Increase 31% 28% 39% No change All investors Institutions Private wealth Intermediaries 61% Decrease

63% 66% 60%

Source: HFM Investor intentions H1 2021 report. Data from a survey of 65 allocators conducted by HFM analysts during Q4 2020. 05 Macro | key trend

Access HFM Performance intel Inflation a looming threat for macro managers

Inflation is quietly replacing Covid-19 as the biggest risk to hedge fund performance in 2021, as the Breakeven inflation rate rollout of the vaccine and a plan to return to relative normality has allowed investors to shift their focus. 2.6

US bond yields have spiked to pre-pandemic levels 2.4 and the ‘breakeven’ rate between five-year Treasury 2.2 yields and inflation-indexed bonds is at its highest 2 level in nearly a decade. Discretionary macro performance has largely 1.8 depended on trades; particularly on 1.6

whether a fund positioned itself for a reversion in ) 1.4 % (

e bond yield too early in the month. The systematic t

a 1.2 r

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hedge fund Tekmerion Capital returned 8.9% in i t

a 1 fl n

February with profits garnered in shorts in 10-year I bond futures as well as investments in the fixed- 0.8 income market, as rates sold off and curves 0.6 steepened sharply during February. 0.4

0.2 The key question for managers 0 How -lived will this inflationary period be? The 1 1 -1 12 13 14 15 16 17 18 19 0 2 r r- r- r- r- r- r- r- r- -2 r- a a a a a a a a a r a Federal Reserve is confident that it will be brief and M a M M M M M M M M M M indicated no interest rate rise until 2024. The Fed expects the US economy to expand 6.5% this year, Inflation rate (%) which would be the fastest economic expansion since 1984, and publicly welcomed the country’s Source: FED figures ensuring food and oil see large price rises in $1.9trn stimulus package. It is an unprecedented emerging markets. The resulting severe price peacetime increase in sovereign debt, with more dislocations could offer macro investors an likely in the coming years as politicians and bankers opportunity to capitalise on any inevitable volatility. plot a fiscal path to a post-Covid world. As an indicator of this, MKP Opportunity Fund, That this is a targeted package is significant – there which manages more than $500m, had its best is no point in stimulating activity that has been month since January 2018, making 2.4%. There were purposefully suspended. Nevertheless, scepticism also gains for seasoned macro funds from Brevan about a continuing bull market has seen hedge funds Howard and Caxton Associates. reduce allocation to technology stocks and shift to Continued stimulation of the economy may provide commodities at record rates. Milburn Ridgefield’s confidence to consumers to restart spending in the Commodity Fund rose 5.9% and Cambrian Capital’s Ahistorical near-term, but rising asset prices are sucking in a lot of CamCap Resources fund gained 9.9%, benefiting approaches to policy capital with a worrying resemblance to 2004–2007. from the substantial rise in energy prices. are now commonplace Furthermore, under enormous political pressure, Similarly, banking has seen the highest inflow for will central bankers really approve interest rate rises three years as the prospect of increased inflation during Covid-19, and merely because of the threat of wage inflation? grows more likely. Even gold, a classic inflation capital allocators Historically, the corollary of higher wage claims, on hedge, has surged. would be wise to the back of a higher cost of living, is much higher The US might also take a more mercantilist recognise these interest rates. But ahistorical approaches to policy approach, seeking to eliminate competitor nations’ are now commonplace during Covid-19, and capital cost advantage by engineering scenarios whereby powerful trends allocators would be wise to recognise these other national wages have to rise. This could be most powerful trends. easily achieved through commodity price regulation 06 platform.hfm.global

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REPORT AUTHORS

Christopher Brown Michael Hunt Senior research analyst, Insights Head of data journalism [email protected] [email protected]

CONTRIBUTORS

Tony Griffiths Todd Palmer Head of research, Insights Production editor, HFM [email protected] [email protected]

Published 29 March 2021 © 2021 all rights reserved. No part of this report may be reproduced or transmitted in any form or by any means without written permission of the publishers. No statement in this report is to be construed as an invitation to invest in hedge funds.