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The US bond rally is easing the pressure on emerging market hedge funds


Falling US bond yields ացումը The weakening dollar is helping to revitalize hedge funds in emerging markets after some executives, including Pharo Management, which has $ 12 billion in assets, struggled after a tough year.

According to the Eurekahedge data group, emerging market funds gained 1.9% last month, up from a profit of 1.1% earlier in hedge funds. This leaves them with 5.4% this year, still lagging behind the average profit of the hedge fund – almost 8%.

Emerging market leaders took advantage of the recent decline in US Treasury yields, which rose earlier this year as easing restrictions on blocking the coronavirus boosted investor expectations of a strong US economic recovery and rising inflation.

The 10-year yield of the treasury increased from 0.9% at the beginning of the year to more than 1.7% at the end of March, when prices were falling. However, after that it fell below 1.5%, partly due to US-China tensions rise,

Investors often exit emerging markets as US growth increases, անձ Treasury returns become more attractive, but they tend to refill money when US bond yields fall. The weakening dollar over the past two months has also helped reduce debt service costs in emerging markets, as their debt is largely denominated in coins.

London-based Pharo, led by former Merrill Lynch banker Guillaume Funkenel, one of the world’s largest emerging hedge funds, was hit hard in the first quarter.

Its $ 5.6 billion Gaia և $ 5.3 billion in macro assets, both of which have earned over the past five years, fell 9% և 7% at the end of March, according to investor figures, while its trading volume fell by about 11.5 percent. In the firm’s growing markets, it was growing relative to some of the older emerging market bonds, says one person familiar with its position.

However, it has combined some of its losses over the past two months to take advantage of more favorable market conditions. According to those who saw the numbers, his Gaia fund fell by 6.3% at the end of May this year. People say its macro fund is down 4.7 percent and its smaller trading stock is down 7 percent.

“The past year has been difficult for fund managers,” said Peter Slap, senior portfolio manager at Seven Investment Management.

Pharo declined to comment on what contributed to the performance.

Other recent acquisitions include London-based Carrhae Capital, which grew 2.7 percent in its hedge fund last month and 4.5 percent in its long-term fund, according to investor figures. The hedge fund gained 2.1% during the year, and the Long fund – 9.6%.

Ali Akay, CEO of Carrhae Investments and a former SAC partner at the hedge fund, said the rise in US bond yields had turned emerging market investors from stockpiles into valuable stocks, which had gained some ground.

laurence.fletcher@ft.com:



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