The H2O Allegro Fund, and the H2O Multibonds Fund, two global macro hedge funds investing in bonds and currencies, doubled in net asset value during the three-year period ending on 30 June, in US dollar terms, according to FE. The two funds managed by the French asset manager H2O, an affiliate of Natixis Investment Managers, are registered for sale in Singapore, but not SFC-registered in Hong Kong.
Oreana Private Wealth’s CIO Isaac Poole told FSA recently that he was planning to increase allocation to alternatives, including global macro funds. Simon Godfrey, head of product management at EFG Bank, explained what he believes are some differences between today’s alternatives and the hedge funds of ten years ago.
However, looking at the level of leverage and volatility, both H2O funds are more akin to the infamous highly-leveraged hedge funds of the previous decade. Both use bond and forex futures extensively to reach gross exposures exceeding 800% of the balance sheet, according to the funds’ fact sheets.
Both funds suffered drawdowns of around 10% in May, largely recovering them in June. While providing outperforming the past three years, these funds are not for the faint-hearted.
Best performing sector
At the end of June, technology was the best performing sector on a three-year return basis. Tech funds on average returned around 45% during the three years ending 30 June, but the best performers in the sector delivered close to double that number (see chart below).
The returns of the funds, however, pale in comparison to returns of individual tech stocks, which propelled the sector to its heights.
The Polar Capital Global Technology Fund and the Blackrock World Technology Fund hold large positions in the US technology giants such as Microsoft (129% gain in the past three years), Facebook (133% gain), Alphabet (113% gain), Apple (49% gain) as well as Chinese internet companies Alibaba (134% gain) and Tencent (149% gain).
Most of the gains of the funds in the sector were made between February 2016 and March 2018, after which the performance flattened.
Top 10 best performing funds
| Fund | 3-yr return (%) |
| H2O Allegro | 101.65 |
| H2O Multibonds | 99.83 |
| Baillie Gifford Worldwide US Equity Growth | 97.23 |
| Polar Capital Global Technology | 86.46 |
| Blackrock GF World Technology | 84.7 |
| Invesco Nippon Small/Mid Cap Equity | 83.37 |
| T Rowe Price Global Technology Equity | 80.79 |
| UBS (Lux) Equity Global Multi Tech | 78.55 |
| Janus Henderson Global Technology | 77.56 |
| PXP Vietnam Emerging Equity | 76.57 |
Data: FE Analytics, in US dollars, as of 30 June 2018.
Bottom performers
Two hedge funds, the Odey Swan and Odey Odyssey, which have appeared on FSA‘s bottom-performer rankings many times previously, are among the worst performing funds again, on a three-year basis, even though both have delivered positive results in the past six months.
Several China A-shares funds, and in particular two ETFs, also ranked low on the list, partly due to a decline in Chinese stocks in the first half of 2018, with a particular drop in June.
Three funds focused on Turkish stocks are on the bottom. Turkish stocks have been volatile during the past three years and the market has had a 30% decline since February 2018.
Ten worst performing funds
| Fund | 3-yr return (%) |
| CSOP SZSE ChiNext ETF | -48.66 |
| Odey Swan | -47.15 |
| Odey Odyssey | -45.39 |
| CCB Intl China Policy Driven | -39.37 |
| BOCHK China Golden Dragon | -33.07 |
| Manulife Turkey Equity | -32.09 |
| Harvest MSCI China A Index ETF | -31.02 |
| Parvest Equity Turkey | -30.85 |
| Invesco Korean Equity | -30.09 |
| iShares MSCI Turkey UCITS ETF | -29.77 |
