Hedge funds that bet on economic trends are attracting cash at almost double last year's pace as they seek to profit from events such as Europe's sovereign debt crisis and China's decision to let the yuan trade more freely.
So-called macro funds pulled in $2.5 billion through April, compared with $4 billion in all of 2009, according to researcher BarclayHedge Ltd. of Fairfield, Iowa. The category had the second-highest average returns after fixed-income funds in the past 36 months, even after losing 1.2% in May, data from Chicago-based Hedge Fund Research Inc. show.
The challenge for investors is selecting from hedge-fund managers with sharply diverging investment views on Europe, where rising budget deficits are roiling the euro; China, which has signaled that it will let its currency gradually appreciate; and emerging markets such as Brazil, where growth is accelerating. Macro funds wager on such trends by trading currencies, bonds, stocks and commodities.
“There is a lot of uncertainty in global markets at the moment, so we are adding short-term trading funds,” said Jose Galeano, chief investment officer at 3A, a unit of Geneva-based Banque Syz & Co. that has invested $2.2 billion in hedge funds for clients.
Hedge funds attracted $23.7 billion through April, bringing assets to an 18-month high of $1.65 trillion, according to BarclayHedge. Deposits into macro funds, which oversee $94.9 billion, equaled 2.7% of assets.