These big hedge-funders are also losing big

[thenews]

Some of the biggest investors on Wall Street are losing money with wrong-way bets in markets around the globe, a surprising black eye amid a rise in stock and bond prices.

Hedge-fund managers including Paul Tudor Jones, Louis Bacon and Alan Howard are among those who have misread broad economic and financial trends. Some have lost money as Japanese stocks fell, while others have been upended by the surprising resilience of U.S. bonds.

An unusual period of calm has exacerbated problems for many trading strategies dependent on volatile markets. The losses by these so-called macro investors are contributing to a trading slowdown hurting the largest investment banks.

The flagship fund at $15 billion Moore Capital Management LP, led by star investor Mr. Bacon, was down 5% this year through the end of May, the firm has told clients. Mr. Jones's flagship fund at $13 billion Tudor Investment Corp. is down 4.4% this year, according to a person familiar with the firm.

By comparison, the S&P 500 index is up 5.4% this year, including price gains and dividends, and the Barclays BARC.LN -0.48% U.S. Aggregate bond index, a standard measure for debt investments, is up 3.4%.

Funds operated by Mr. Howard's Brevan Howard Asset Management LLP, Fortress Investment Group FIG -1.56% LLC, Caxton Associates LP, Discovery Capital Management LLC and Balestra Capital Ltd. also have posted losses, according to people familiar with their performance.

It is always difficult predicting broad trends, and the losses could quickly reverse. But hedge funds charge high fees with the expectation of impressive performance in any kind of market, and these investors built reputations with prescient market picks. Those running so-called macro funds generally bet on macroeconomic trends in global markets while investing in stocks, bonds, commodities and currencies.

"Macro investors have had a very, very hard time with the fact that bonds have done well and volatility is so limited," said Matt Litwin, director of research at Greycourt & Co., a Pittsburgh-based investment firm that invests $9 billion in hedge funds and other firms but has been reducing some of its investments with macro hedge funds. "There are a lot of losers."

Many funds piled into Japanese shares last year when they began rallying. But the Nikkei Stock Average is down 7.1% since reaching a high in January, amid doubts about the sustainability of Japan's economic recovery. Fortress, a $63 billion firm, has acknowledged to investors in its Fortress Macro fund that it was hurt by both this year's run-up in U.S. Treasury prices and weakness in the Nikkei. The Fortress Macro fund was down more than 3% this year as of June 6.

Brevan Howard Capital Management's roughly $28 billion flagship fund was down 3.8% through June 6, according to an investor in that fund, with interest-rate and bullish Nikkei bets among its losers. Caxton Associates in New York, an $8 billion firm, has lost money every full month this year and was down more than 6% at the end of May, according to the firm's investor updates, partly due to bearish currency positions.

Kyle Bass's $2 billion Hayman Capital Management LP has lost money on wagers against some European countries, as well as a bet on further weakening of the Japanese yen, people familiar with the firm say. The Dallas-based firm's main fund suffered its steepest two-month drop in five years at the start of the year and fell more than 6% in the first quarter, these people say.

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[Peter m]

informative article

[suk1000k]

I have not posted for a very long time, but I met with a fully automated strategy hedge fund in Hong Kong this year that was managing $1.5 billion US, leveraging positions mainly in Chinese index futures. The fund was down more than 50%. Disaster! The algos used by such funds are quite simple programs really, nothing like so complicated as most of the stuff on here. Orders are routed directly through to the broker.. Traders mainly overseeing the trades and only two of them in that office.