U.S. bond yields and the weakening dollar have helped drive the recovery of emerging hedge funds in the market, including $ 12 billion in assets by Pharo Management, after a tough start to the year.
Emerging market funds gained 1.9 percent last month, according to the Eurekahedge data group, ahead of a 1.1 percent gain among hedge funds. This leaves 5.4% this year, behind the average earnings of hedge funds of almost 8%.
Emerging market managers have taken advantage of the recent decline in U.S. Treasury yields, which began earlier this year as a reduction in coronary heart disease blockages boosted expectations of a strong U.S. economic recovery and rising inflation.
The 10-year Treasury yield rose from more than 1.7 percent from the beginning of the year when prices fell in late March. However, it has since fallen below 1.5 per cent, driven in part US-China tensions escalate.
Investors often exit emerging markets as U.S. growth increases and Treasury yields become more attractive, but they tend to throw money back When U.S. bond yields fall. The weakening of the dollar over the past two months has also helped lower the cost of maintaining debt service in emerging markets, as many of their debt is denominated in the green dollar.
London-based Pharo, led by former Merrill Lynch banker Guillaume Fonkenell and one of the largest hedge funds in the world’s emerging markets, hit hard in the first quarter.
The $ 5.6 billion Gaia and $ 5.3 billion Macro funds, which made money in the last five years, fell nearly 9 percent and 7 percent, respectively, at the end of March, according to numbers sent to investors. the fund fell by about 11.5 percent. The company had a rise in emerging markets and some bonds in new markets that were outdated, said one person familiar with its positioning.
However, it has reduced some losses in the last two months, taking advantage of favorable conditions for emerging markets. The issue fund fell 6.3% this year to the end of May, according to people who saw the numbers. Its Macro fund has fallen 4.7 percent, and its smaller trading fund has lost 7 percent, people said.
“The last year has been tough for fund managers in emerging markets,” said Peter Sleep, chief investment officer at Seven Investment Management.
Pharo declined to comment on what prompted the performance.
Other funds that have won recently include London’s Carrhae Capital, which rose 2.7 per cent in hedge fund and 4.5 per cent in long-term fund according to numbers sent to investors. The hedge fund gained 2.1 percent year-on-year and the Long fund gained 9.6%.
Ali Akay, chief investment officer at Carrhae and a former partner in the SAC hedge fund, said U.S. bond yields are rising as new markets have pushed investors from growth stocks to stock stocks, which has benefited some of their positions.