July 9, 2015 / 3:07 PM / 4 years ago

Greek shock in June helps jolt macro hedge fund recovery

* Global Macro down 2 pct on average in June - Eurekahedge

* Managed Futures down 3 pct on average - Eurekahedge

* Hit by rising political tension around Greece debt deal

By Svea Herbst-Bayliss and Nishant Kumar

BOSTON/LONDON, July 9 (Reuters) - Hedge funds that make big bets on currencies, interest rates and commodities were hit hard in June as a worsening Greek debt crisis, concerns about China growth and U.S. rate rise uncertainty unsettled markets.

The losses mark a reversal in fortunes for the global macro and trend-following trading strategies, both of which had finally appeared to be bouncing back after years of lacklustre returns. Such funds had gained about 3 percent through May this year, their best start in six years.

While many funds are still finalising monthly numbers and will begin releasing them to investors in the coming days, initial data from industry tracker Eurekahedge shows these funds were down about 2 percent on average in June.

During June, leading markets fell as the political tussle between Greece and international creditors over the terms of a debt bailout raised concerns Athens could exit the euro zone in a disorderly fashion, spreading market contagion.

Adding to that were fresh concerns about global growth, including in China, and fresh uncertainty around an impending U.S. rate rise.

Over the month, the FTSE 100 fell 6.6 percent, Brent crude fell 5.5 percent, and the dollar index - a consensus ‘buy’ for many funds - fell 1.5 percent.

The losses are likely to make for a disappointing second quarter of 2015 after funds first grappled with a retracement in the dollar in April and then were hurt at the end of June by uncertainty in Greece that translated into losses elsewhere.

The reversal also raises the risk of further downside in markets as these macro hedge funds managing hundreds of billions of dollars unwind their bets.

“Generally, the positioning of macro funds is a good leading indicator for markets, because of the trend-following nature of this hedge fund strategy,” said Bruno Schneller, chief investment officer at fund of fund group Skenderbeg Alternative Investments.

“We’re a little bit worried that further de-risking by macro funds could impact markets negatively.”

As well as Greece, of particular concern will be the extent to which sharp swings in China’s onshore stock market, as the government fights to control panic selling, spooks investors more broadly.

The data on returns spells bad news for pension funds and wealthy individuals who have been steadily increasing exposure to these types of funds in recent months, boosting the industry’s size to above $3 trillion, as returns from bonds, stocks and cash deposits dwindle.

Quality Capital Management, a global macro fund based in Britain, lost 7.9 percent in June, while Field Street Capital was off 3 percent, investors in the funds said. Brevan Howard’s main macro fund, meanwhile, lost about 1 percent, an investor letter seen by Reuters showed.

So-called ‘managed futures’ funds, which make similar bets to global macro funds, following trends in the global economy and using mathematical models to evaluate risk and pricing in the financial markets, lost even more - down more than 3 percent on average in June, Eurekahedge data showed.

The $6 billion Lynx Programme fund lost 6 percent last month, while Tulip Trend Fund lost nearly 15 percent, according to performance data seen by Reuters.

For global macro funds which had been struggling for years as fixed income volatility had virtually dried up in the era of easy money and few central bank moves, the months before April had been more positive and many funds were up on the year.

Eaglevale, the fund run by a trio of former Goldman Sachs employees, including President Bill Clinton’s son-in-law Marc Mezvinsky, for example, was posting its best year ever through the end of May, thanks largely to having called the dollar’s move correctly.

The firm’s main fund was up 5.7 percent through May after having lost 3.6 percent in 2014 following a 2 percent gain in 2013 and a 2 percent loss in 2012. (Editing by Simon Jessop)

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