Top Hedge Fund PruLev Gained in May on Equities, Commodities

  • PruLev Global Macro Fund up 5.4% in May, 23.3% year-to-date
  • Returns compare to overall losses in macro funds this year

The PruLev Global Macro Fund, among this year’s top-performing funds, returned 5.4 percent in May with bets on oil and commodities contributing to the gains that helped it beat other hedge funds trading on macroeconomic developments.

The fund was also supported last month from positions in stocks of developed market exporters that stand to benefit from a stronger dollar, including Switzerland and Japan, bringing its total gain this year to 23.3 percent, according to preliminary figures in a newsletter obtained by Bloomberg News. By comparison, the global Eurekahedge Macro Hedge Fund Index was little changed in 2016 through the end of May.

PruLev’s performance stands out during a tough time for macro hedge funds as managers were caught off guard by central bank stimulus worldwide, declining trading volumes and wide swings in prices in the markets. Macro hedge funds suffered $7.3 billion in outflows between January and March, with some of the best known names in the industry such as Brevan Howard Asset Management LLP and Tudor Investment Corp. losing money.

Commodities, Oil

The fund, which started in 2012 with $7.2 million of assets, managed $61 million as of end of April, deputy fund manager August Li said in an e-mail. The PruLev fund has returned 44 percent per year in the three years through the end of April, according to data compiled by Bloomberg, making it the second-best performing hedge fund betting on economic developments.

Its commodity holdings gained in May “due to prospects of lower inventories and increasing demand,” according to the newsletter. "Outright positions in crude oil and agricultural commodities" led the way, the firm said in the newsletter.

"As U.S. oil rig counts and inventories fell, the supply-demand situation is getting more balanced, even if the upcoming OPEC talks do not change the decision of major producers to continue pumping oil to the market," according to the newsletter.

Ministers from the Organization of Petroleum Exporting Countries decided against production limits at a June 2 summit, while U.S. data released the same day showed oil supplies are dropping, a sign that the supply glut that sent prices plummeting this year is finally dissipating.

Fixed-Income Setback

Unlike many hedge funds, which bet on economic developments by taking highly concentrated positions, PruLev selects each investment and its leverage by how much it adds to the overall portfolio risk, fund manager Norman Tang, who previously was head of market risk analytics at Standard Chartered Plc, told Bloomberg News in February.

“The equities asset classes more than made up the setbacks in fixed income, as equities were buoyed by the optimism for more economic growth,” according to the newsletter.

The fund employs long and short investment strategies in stock index futures, commodity futures and bonds, mainly in liquid developed markets. PruLev returned 31.4 percent last year, with about half of its returns coming from a short-term investment in the Swiss stock market index.

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