Have ‘macro’ funds worked?

Macroeconomic factors are once again becoming hard for investors to ignore. 

Rising energy prices have pushed inflation back on to the agenda, and with that we get the prospect of interest rates staying higher for longer, or even rising. 

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As we discussed yesterday, a powerful bond sell-off is already under way, with potential consequences for many different asset classes.  

As usual, diversification can be one way to try and ride this out, as can investing in areas that do well in inflationary times, such as commodities.  

Many equity fund managers will almost claim to ignore such factors.

Well-known managers such as Terry Smith argue that they cannot predict the direction of macroeconomic forces, and therefore simply try to back good companies.  

And many teams will boast a “bottom-up” stock selection process that almost ignores the macro altogether. 

But it’s also worth remembering that some funds do deliberately seek to navigate a shift in macroeconomic conditions. 

They could provide a hedge against such changes, although these funds differ markedly when it comes to performance. 

What even is a macro fund? 

Managers of macro funds will tend to take a view on how wider economic forces could shape up in future – for example looking at the direction of inflation, where interest rates could end up, and how currencies could move relative to one another. 

They can then express these views via all manner of instruments – for example by taking exposure to certain bonds or to given currencies. 

Such funds might, in theory, offer some diversification against broad equity exposure – but they aren’t always so easy to understand. 

Let’s take one example from the investment trust sector, BH Macro GBP Ord (LSE:BHMG). 

The trust deliberately looks to provide diversification against the likes of equity markets, and has done well at points when these have struggled.  

Back in 2018, we saw the MSCI World index lose around 3% thanks to concerns about rate rises and a US/China trade war, but BH Macro shares managed to return more than 18%. 

Then, in 2022, when bond and equity markets were both in freefall, the trust’s shares returned roughly 20%. 

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One problem is that the trust remains very difficult to monitor or even understand. 

Its literature points to exposure to “global fixed-income and foreign exchange markets, with peripheral exposure to other asset classes such as equity, credit and commodities”.  

The fund’s monthly factsheets disclose plenty about performance, about the portfolio’s correlation to equity markets over time, and the sheer level of resources behind this hedge fund strategy. 

But neither that nor its financial reports make it easy to grasp what broad trades the investment team is making.  

The trust has also had some very mixed returns in recent years, with the shares falling by around 18% in 2023.

Investors enjoyed a 10.6% positive return in 2024, followed by a small loss in 2025 and modest gains so far this year. 

BH Macro does, therefore, seem to require something of a leap of faith from investors, although it has delivered the goods in the past. 

What else? 

Some of the so-called absolute return funds also apply a macro strategy, as do many bond funds. 

And some of these might be easier to understand that BH Macro. 

A name that once proved popular but has struggled on the performance front in recent years is absolute return vehicle JPM Global Macro Opportunities C Net Acc (B4WKYF8).  

Its literature outlines the sort of financial instruments it uses, from bonds, equities and gold to interest rate swaps and commodity futures.  

Investors can also get a sense of the themes it targets, from “widespread technology adoption” to healthcare innovation. 

An absolute return name with a better recent track record is Jupiter Merian Glb Eq Abs Rt I £ H Acc (BLP5S80), which can take long and short positions on shares (the latter being a bet on a share prices falling). 

Interestingly, it recently had a decent short position on the financials sector, an area that has proved very lucrative in recent times. 

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The fund has tended to produce consistent positive returns by calendar year – although it did make a roughly 13% loss in 2019, in part due to some of its investment style exposures at the time. 

Beyond absolute return, investors will find that flexible bond funds must inevitably pay at least some attention to the macro. 

Some flexible funds here, such as Jupiter Strategic Bond I Acc (B4T6SD5), have in the past sought to diversify across different bond subsectors rather than taking aggressive bets on one particular eventuality.  

But others, such as Allianz Strategic Bond C Inc (B06T936) back when it used to be managed by Mike Riddell, used to take bolder calls. 

Keeping tabs 

Many of these funds require keen observation where possible, although the investor is ultimately outsourcing a lot to the manager. 

Where available, it can be worth closely watching fund commentaries for a sense of what the investment team is up to. 

Investors may ultimately look to take simpler hedges against macro uncertainties – for example by taking exposure to assets like commodities in a more straightforward fashion. 

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Having said that, one widely followed cohort does fit the “macro” bill. 

The so-called wealth preservation trusts, Ruffer Investment Company (LSE:RICA), Personal Assets Ord (LSE:PNL) and Capital Gearing Ord (LSE:CGT), have tended to pay plenty of attention to external forces and sought to invest accordingly. 

These trusts, to their credit, issue plenty of commentary about their investment choices. 

Investors can also easily get a sense of the asset allocation in these portfolios via factsheets and financial reports.