British hedge fund manager Chris Rokos and his partners made more than £ 900m in profit during the initial wave of the pandemic, after an excellent performance that has since soured amid turmoil in the bond market.
Rokos Capital Management, one of the world’s largest macro hedge fund firms, generated £ 914 million in profit in the 12 months to 31 March 2021, revenue available to be distributed among the hedge fund’s partners, according to a filing at Companies House. Rokos, formerly a co-founder of rival Brevan Howard, earned £ 509 million, the bulk of the profits.
The windfall came after Rokos’ fund delivered returns of 44 percent in 2020, its best annual performance to date. The firm did not immediately comment on its latest financial statements.
The fortunes of the fund changed in the ensuing months, when several attacks of severe volatility in the debt market dealt a severe blow to its performance.
The fund achieved negative returns of 25 percent from January to November 2021. A person familiar with the fund’s record described the performance as “disappointing” after a “bumper” year. The figures were first reported by Bloomberg.
Macrofunds averaged returns of minus 1 percent last year, according to Goldman Sachs, as a number of executives struggled to gauge the effects of higher inflation on bond markets.
Mayfair-based Rokos, which specializes in betting on how broad economic trends will affect global markets, has gone wrong early in 2021 when a sudden push higher in inflation expectations caused a decline in the stock and bond markets.
Rokos hit weather in October, when concerns about rising global inflation betting prompted central banks to accelerate their exit from aggressive stimulus measures that have supported the world economy since the depths of the coronavirus crisis in 2020.
At the same time, investors have begun to worry that policymakers may be overcompensating in their efforts to counter rapid price growth, hampering the longer-term economic outlook.
Short-term bonds, which are highly sensitive to monetary policy expectations, sold sharply in October, pushing higher returns on those assets. Long-term bond yields have risen more modestly over the period.
This flattening of the so-called yield curve has disrupted a popular hedge fund bet that long-term yields will rise faster than short-term yields as the world economy continues to recover from the pandemic.
The painful run for Rokos in 2021 comes as the industry has struggled to attract new capital, given concerns about often poor performance among executives this year, a major shift to private equity and debt, and questions about fund fee structures.