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Hedge funds thriving despite slowing global economy and renewed trade tensions

Traders have dumped riskier assets such as stocks and crude oil moving towards “safe havens assets” including bonds.

Hedge funds thriving despite slowing global economy and renewed trade tensions

The US 30-year bond yield has fallen to 1.96% its lowest level on records which stretch back to 1973.

It appears investors are rattled by fears of global economy and renewed trade tensions.

Adding fuel to the fire, US President Donald Trump tweeted “Of course China wants to make a deal. Let them work humanely with Hong Kong first!”

Additionally, Beijing accused the US of severe violation of previous agreements on trade over Washington plans for 10 per cent tariffs on $300bn of Chinese imports. The Ministry of Finance said; “China will have to take necessary counter-measures.”


Recession risk is rising

The Dow plummets 800 points and the spread between two- and 10-year Treasury Yields inverted for the first time since 2007.

This for many traders is spelling out recession. Yields of US and UK 10-year government bonds dip below those of shorter maturity debt for the first time since the financial crisis. Historically this has been a sign of recession.

Traders have reacted by dumping riskier assets such as stocks and crude oil and moved into perceived “safe havens assets” including bonds.

Bonds market

Concerns over weak global growth and inflation have in fact brought about large profits for the year.

The most profitable include computer driven hedge funds that attempt to work off the back of market trends.

A human trader will likely question the logic of buying or keeping a bond that is perceived to carry a guaranteed loss. A robot trader however will monitor price moves and will not have any issues.

Some human traders are getting great results however. The fixed-income frenzy has been profitable for;

  • Brevan Howard who gained 8.5%
  • Caxton Associates who gained 16.3%
  • Kirkoswald Capital Partners is up 18%


All three were helped by bets on falling yields.


Hedge funds are thriving

Many hedge funds are thriving in a world of negative-yielding debt as they ride the big rally.

Yields fall as prices rise, therefore managers who have stuck with their holdings as yields tumbled below zero have benefited from very attractive profits.

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