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Macro funds: Experience pays off

As one Euromoney reader put it: “Macro has had more comebacks than Lazarus.” But is the strategy back to stay? – at least for three or so years, say managers.

While nearly all strategies are down this year in HFR’s aggregated indices, the HFRI Macro Index is up year-to-date by 6.76%, and the Macro Systematic Diversified Index is up more than 12%. In 2007, the indices returned 11% and 10% respectively.

Good performance looks set to continue. The bear economy will persist, say managers, and that means interesting trading opportunities for skilled macro managers. "The 2004-07 market environment was difficult for macro," says Kevin Harrington, managing director at macro fund Clarium Capital Management. "Petrodollar recycling drove unusual liquidity distortions that caused traditional macro relationships to break down. The higher oil prices went, the larger the petrodollar liquidity distortions grew, narrowing credit spreads and lowering real interest rates even as underlying damage to the economy from the energy shock was intensifying. When that damage became severe enough to pop the credit bubble, and the dollar weakened enough to start shrinking the US current account deficit, the trend toward unusually low credit spreads and risk premia reversed. We see the dollar trending lower still, and are bearish for some years yet. Risk premia will continue to rise until the US current account deficit approaches zero,"

Despite overall macro industry outflows, Harrington says Clarium has seen a lot of investor interest.

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