After getting thrashed in the era of low interest rates, the last remaining hedge fund managers dedicated to the world of foreign exchange are in fighting spirits this year.
Aggressive Federal Reserve tightening is sending the US dollar to historic highs and spurring big moves across exchange rates from Europe to Asia. That’s proving a godsend for a small band of FX-focused quant traders and discretionary managers as they notch some of their biggest wins since the halcyon days of the pre-2008 era.
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Hedge funds in the industry tracked by Eurekahedge Pte Ltd. are poised for their best year since 2003 as volatility rises and monetary policy diverges. Thanks to the extended rally in the greenback and the resulting plunge in the euro and yen, trend-chasing currency managers in a BarclayHedge index are also set for their strongest performance since 2003.
After getting thrashed in the era of low interest rates, the last remaining hedge fund managers dedicated to the world of foreign exchange are in fighting spirits this year.
Aggressive Federal Reserve tightening is sending the US dollar to historic highs and spurring big moves across exchange rates from Europe to Asia. That’s proving a godsend for a small band of FX-focused quant traders and discretionary managers as they notch some of their biggest wins since the halcyon days of the pre-2008 era.
Hedge funds in the industry tracked by Eurekahedge Pte Ltd. are poised for their best year since 2003 as volatility rises and monetary policy diverges. Thanks to the extended rally in the greenback and the resulting plunge in the euro and yen, trend-chasing currency managers in a BarclayHedge index are also set for their strongest performance since 2003.
The Norwalk, Connecticut-based investor helps oversee a $1.5 billion macro strategy that’s up 45% in the first half of this year, fueled by long dollar positions and wagers against the euro and yen, which have both crashed to two-decade lows in the era of Fed hawkishness. Graham Capital has $18 billion of total assets under management.
Boston-based P/E Investments, meanwhile, has notched a 16% return this year through June in its FX Standard Strategy, and has $13.7 billion allocated to currency strategies, according to a person familiar with the matter. It allocates on the basis of statistical patterns factoring in volatility and market risk.
A P/E Investments spokesperson declined to comment.
Traders may see even more opportunities ahead given elevated uncertainty over the outlook for inflation and economic growth. For example, Alan Ruskin, chief international strategist at Deutsche Bank, predicted the euro could shoot up as much as 30% if there’s a solution to Europe’s energy crisis -- something that could provide outsize gains for currency funds on the right side of the trade.
Read the full article here by Amelia Pollard, Advisor Perspectives.
