Macro Hedge Funds Suffer Despite Industry Boom

Poor performance and outflows began in 2008 and haven't let up for the once-desirable macro and managed futures strategies, according to eVestment.

(February 4, 2014) — Macro and managed futures-focused hedge fund strategies have yet to recover from the financial crisis as many continue to suffer capital outflows and poor performance, according to data firm eVestment.

Many of the industry’s major players follow these strategies, including Brevon Howard, Bridgewater Associates, and Tudor Investment Corporation.

In strong demand during the late 1990s and early 2000s, both macro and managed futures approaches have failed to bounce back from 2008 and are lagging far behind the hedge fund industry, the firm stated in a report. Cumulative gains in macro strategies were just half of the hedge fund aggregate over the last five years at around 25%. Performance for managed futures has also flatlined since October 2010.

The two strategies underperformed their peers in the fiscal year 2013, with macro strategies returning 2.84% and managed futures losing 1.87%.

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Assets under management (AUM) for both types of funds decreased in 2013, according to the report, whereas capital flowed into the industry as a whole.

Combined AUM was $357 billion at the end of the fourth quarter in 2013, a figure higher than that of previous two quarters due to a pick-up in performance late in the year. Macro funds’ AUM declined 1% in 2013 to $213.2 billion and managed futures funds’ AUM hit the lowest level since 2007, at $143.8 billion.

eVestment found liquidations of these two strategies overwhelmed fundraising by new entrants, attributing the trend to performance and flow momentum.

Since the financial crisis, “multiple years of poor performance and an inability to recover lost high water marks have prompted further liquidations at rates higher than during that experienced during the financial crisis,” eVestment said.

However, funds with more than $1 billion under management outperformed small and mid-sized peers in FY 2013, a trend that could continue in 2014 “if those larger managers with an enhanced capacity to ride a poor asset gathering environment outperform smaller managers,” the report stated.

The report’s authors expected these issues to remain going forward without significant revitalization of the two strategies.

“What was once their largest asset base, the commingled funds of hedge funds industry, has been rapidly shrinking as well,” the report said. “While there has been an increase in bespoke portfolios within the funds of hedge funds space by larger institutions, it is likely these same institutions have been using hedge funds for less correlated exposures to markets with which they are significantly more comfortable, namely credit and, more recently equity markets.”

However, hope for macro and managed futures funds could be found in the recent shaky equity markets and potential for a rebound in fixed income markets, eVestment said.

Home > News > Newsmakers > Insurer Snaps Up Asset Management Arm of Troubled Lender

Newsmakers February 3, 2014

Insurer Snaps Up Asset Management Arm of Troubled Lender

Amid ongoing sale rumors about Russell Investments, a $513 million acquisition deal has closed between New York Life Investments and Dexia Asset Management.

(February 4, 2014) – Dexia has sold off its asset management arm to New York Life Investments, six months after a deal with a private equity firm collapsed due to missed payments.

The insurer paid $513 million for the division, which manages $100 billion in primarily European and Australian assets. This brought New York Life Investments’ assets under management to $511 billion and expands its reach with offices in Brussels, Paris, Luxembourg, and Sydney.

New York Life Investments handles the insurance company’s general account, and serves as an umbrella organization for its eight boutique asset management operations. These affiliates—Cornerstone Capital Management, MacKay Shields, GoldPoint Partners, among others—together managed $189 billion in external capital as of the end of 2013.

Dexia Asset Management will remain a distinct operational unit, according to the insurer, and current CEO Naïm Abou-Jaoudé will retain leadership. New York Life Co-President Yie-Hsin Hung has been appointed chairman of the division’s board of directors.

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John Kim, vice chairman of New York Life, called the acquisition a “milestone” for the insurance company. “Expanding our asset management business in Europe and Australia represents a significant growth opportunity for New York Life to become a key player in the global asset management arena,” Kim said. He noted that the division would “benefit from the strength, resources, and capital of New York Life.”

Once the world’s largest municipal lender, Dexia suffered catastrophic losses during the European sovereign debt crisis and has been selling off branches of its business.

In July, Dexia announced it had terminated a prior agreement to sell the unit to Hong Kong-based GCS Capital for the same price. “GCS Capital has not been able to meet its contractual payment obligations under the share purchase agreement,” Dexia said, announcing it would resume talks with other interested parties.

The financial institution has been liquidating assets to repay €5.5 billion ($7.4 billion) in bailout money injected by the governments of France and Belgium. In the past two years it has sold off Dexia Bank Belgium, Dexia Banque Internationale à Luxembourg, a private bank in Turkey, and its information technology operation, according to company documents.

“The sale of Dexia Asset Management completes the divestment process of the largest commercial franchises of the Dexia Group,” the firm said February 3. It will now focus its efforts on “ongoing disentangling projects,” managing its balance sheet wind-down, and “ensuring the operational continuity of the group.”

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