Special Memo on Macro

As of Friday March 17th, 2023, the HFRX Macro/CTA Index is down 3.45% MTD and the HFRX Macro: Systematic Diversified CTA Index is down 7.08%.

The global banking crisis caused shocks in both US and European capital markets leading to losses for discretionary and systematic macro strategies. Historic price movements were registered in 2-year government bond yields in the US on March 13th then in Germany on March 15th. (see chart below).

The volatility caused widespread de-risking and caught many strategies on the wrong side due to positioning for a rise in interest rates rather than a fall. The worst performing discretionary strategies were those that focused on levered fixed income relative value trades. Systematic trend following losses stemmed from short bonds, long commodities and long European equity positions.

Outlook for Macro:

The situation remains fluid, but if the global banking crisis continues to stabilize the discretionary macro opportunity-set has expanded versus two weeks ago. Volatility is creating good entry points to re-engage with higher US and Europe rates positioning and to selectively take advantage of oversold European financials. Also, industry-wide de-risking dislocated other popular macro themes like targeting the BoJ to abandon YCC later this spring.