Top Macro Hedge Fund Lost 16% Last Month on Return of Volatility

(Bloomberg) -- The PruLev Global Macro Fund gave up almost one-third of last year's 52 percent gain in February, after being caught out by the return of volatility.

The fund, the world's best performer last year among macro funds with assets of more than $100 million, lost 16 percent, mainly from stock bets, according to preliminary figures in a newsletter obtained by Bloomberg. The decline in the Singapore-based fund's Class-B shares compares to a 0.9 percent drop in the Eurekahedge Macro Hedge Fund Index last month.

Markets were roiled last month by strong U.S. jobs growth, a surge in volatility, and new Fed Chairman Jerome Powell suggesting the central bank could accelerate the pace of monetary tightening this year. 

“Despite the fund's preparation with de-risking for the inevitable correction in the markets, the technical behavior of the markets proved to be highly unexpected in the beginning of February,” PruLev said in its letter. “As the fund invests based on fundamentals, it was negatively affected in this occasion.”

Other hedge funds have also suffered during the market turmoil. David Einhorn's main hedge fund at Greenlight Capital fell 6.2 percent in February, extending losses to 12.3 percent this year, according to a client update seen by Bloomberg. Man Group Plc Chief Executive Officer Luke Ellis said recent market moves had impacted performance in some areas, particularly momentum strategies.

PruLev's slump stands out after it outperformed rivals in the past two calendar years. Funds betting on macroeconomic developments gained 3 percent in 2016 and 3.6 percent last year, according to Eurekahedge. PruLev gained 34 percent and 52 percent in those years respectively, the newsletter shows.

The fund's equity portfolio lost 17 percent last month, according to the newsletter. Fixed income gained 1.4 percent, while commodities and currencies were barely changed. PruLev had $113 million in assets as of last month, according to the preliminary figures.

To contact the reporter on this story: Klaus Wille in Singapore at kwille@bloomberg.net.

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Peter Vercoe

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