(Bloomberg) -- Low rates. No divergence.
These tropes, repeated by the titans of macro trading to explain lackluster results, aren't holding back funds run by Robert Gibbins, Jeff Talpins and Chris Rokos. Gibbins's Autonomy Capital surged 18 percent this year through mid-September, according to an investor who declined to be named.
The trio is riding above a sea of heavy hitters, such as Caxton Associates and Tudor Investment Corp., that spread assets across dozens of trading teams. Such firms suffer from stricter risk constraints put in place after the financial crisis and a reliance on directional bets in developed markets, said Arvin Soh, a portfolio manager at GAM Holding AG. Autonomy and other top performers are taking more chances with tactical trades, derivatives or bets in emerging markets.
“Managers who did well this year are more comfortable with taking significant risk in contrast with the old macro firms,” said Soh, whose Zurich-based firm invests in hedge funds.
Talpins, who started his $8.8 billion fund in 2005 and spun it out into Element Capital Management in New York two years later, returned 11.5 percent this year through August, a person familiar with the matter said. Rokos Capital Management, which was founded last year in London and manages about $4 billion, was up 9 percent through Sept. 23, according to another person.
Such profits this year are probably out of reach for some macro veterans, who bet on broad economic trends and bemoan an array of forces hurting their performance. Andrew Law, who runs $7.8 billion Caxton Associates in New York, said in a Sept. 13 letter to clients that unconventional monetary policy has led to unfavorable markets and spurred the proliferation of quantitative and factor-based investors who bet on fleeting price moves rather than “classic macro opportunities” from business cycles and government policies.
The resulting market “distortions” will reverse themselves, wrote Law, whose firm was started by Bruce Kovner in 1983. Caxton will be rewarded for sticking to its focus on politics, policy and rigorous risk controls rather than succumbing to the “latest investment fads.”
Outside The Box
Paul Tudor Jones, who founded his Greenwich, Connecticut-based firm in 1980, sees the “desultory macro environment” continuing and is pushing his managers to take on more risk to boost their sluggish performance, he told investors in August.
We “must have a portfolio manager line-up that can adapt to this anomalous situation,” the billionaire wrote. “We just have to think outside the box.”
Gibbins, 47, who headed emerging markets and macro proprietary trading at Lehman Brothers Holdings Inc., founded Autonomy in 2003. His $3.5 billion New York-based fund profited this year on Brazil's currency, stocks and bonds amid turmoil in the country. The real and equities surged earlier this year on bets then-President Dilma Rousseff would be ousted and a new administration would pull the nation out of its deepest recession in a century.
Tactical Trader
Talpins, 41, who cut his teeth at Goldman Sachs Group Inc. and Citigroup Inc., makes tactical trades and constructs his bets mainly with options. He's never had a losing year since the fund started 11 years ago at Proxima Alfa Investments.
Rokos, 46, who made his fortune as a co-founder of Brevan Howard Asset Management, engineered one of the largest hedge fund startups in Europe last year. His fund, which also relies heavily on options and other derivatives, got off to a rocky start, losing 3.2 percent in his first three months of trading.
The fund rebounded this year and in July profited from a selloff in Treasuries and gains in Australian and New Zealand government bonds, according to an investor. Rokos, another tactical trader, also made money that month from wagers on U.S. and Japanese equities, which more than offset the fund's bets against European stocks. They rose after the June Brexit vote.
Spokesmen for Gibbins, Talpins and Rokos declined to comment.
Jones anticipates the day when old-school macro traders make their comeback. Central bank policies, which have suppressed volatility and encouraged more government debt, will backfire, he wrote. The surge in Greek three-year yields in 2011 and 2012 is an analog to what will happen in a major developed debt market.
When “this debt bubble bursts, macro strategies will feast on these policy transgressions,” Jones said.
--With assistance from Nishant Kumar and Boris Korby To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net. To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski, Josh Friedman
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