A veteran trader’s well-timed bet on the end of easy money has achieved triple-digit returns in his new hedge fund’s first full year.
After running Eagle’s View Capital Management as a fund of funds for 16 years, New York-based founder Neal Berger decided to add his own fund to the mix. The Contrarian Macro Fund launched initially with partner capital in April 2021 to load up on bets that the Federal Reserve would unwind a decade of stimulus — even as policy makers were describing inflation as “transitory.”
By the time the Fed reversed course, Berger was starting to accept external money.
“The reason why I started the fund was that central bank flows were going to change 180 degrees. That key difference would be a headwind on all asset prices,” said Berger. “One had to believe that the prices we saw were, to use the academic term, wackadoodle.”
The wager proved prescient, delivering the new fund a return of about 163% in 2022, according to an investor document seen by Bloomberg. Berger declined to comment on the fund’s returns. New York-based Eagle’s View manages about $700 million in total, with $200 million in the Contrarian Macro Fund.
He joins a number of macro hedge fund managers, including Said Haidar, Crispin Odey and Michael Platt’s BlueCrest Capital Management, who managed to use bets on the economy to multiply their money during the past year of turbulence that spelled lackluster returns at many other funds.
Berger said he’s using futures contracts to short stocks and bonds he saw as distorted by years of monetary stimulus.
“The $19 trillion of sovereign debt trading at negative yields, the SPAC boom, the crypto boom, private equity valuations and public equity valuations — they’re all stripes of the same zebra,” said Berger, whose prior macro trading experience includes Millennium Management, Chase Manhattan Bank and Fuji Bank. “The zebra being the ocean of liquidity, first in response to the Great Financial Crisis and then to Covid.”
The Contrarian Macro Fund mostly holds bearish bets on Europe and American assets, with hedges that pay off during more positive periods. After the Bank of Japan widened the upper limit for 10 year-yields, the fund also set up short positions against Japanese bonds and wagered that the yen would rise. According to Berger, this is only the beginning of the end of the global carry trade, which aims to use low-yielding currencies such as the yen to buy something with higher returns.
Berger plans to keep his short positions for years. The pain isn’t over yet, and its end will only be clear after assets trade sideways for multiple months, he said.
“You have your variations, your rallies day-to-day, month-to-month,” he said. “But big picture, everything is going down. Price action is ultimately the bible.”
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