UK hedge fund manager Chris Rokos and his partners made more than £900m in profits during the initial wave of the pandemic, after a stellar performance that has since soured amid bond market turbulence.
Rokos Capital Management, one of the world’s biggest macro hedge fund firms, generated £914m in profits in the 12 months to March 31 2021, income that is available to be divided up among the hedge fund’s partners, according to a filing with Companies House. Rokos, previously a co-founder of rival Brevan Howard, earned £509m, the largest share of the profit.
The windfall came after Rokos’s fund delivered returns of 44 per cent in 2020, its best annual performance to date. The firm did not immediately comment on its latest financials.
The fortunes of the fund changed in the months that followed, when several bouts of severe volatility in the debt market dealt a strong blow to its performance.
The fund posted negative returns of 26 per cent in 2021. A person familiar with the fund’s record described the performance as “disappointing”, following a “bumper” year. The figures were first reported by Bloomberg.
In spite of last year’s losses, Rokos had been able to raise $1bn in additional capital from investors in recent days, the person said, in a sign that some clients viewed the performance setback as temporary. The firm also aims to raise a further $1bn, which would take its total assets to approximately $14bn.
Macro funds notched up returns of minus 1 per cent last year on average, according to Goldman Sachs, as a number of managers struggled to gauge the effects of higher inflation on bond markets.
Mayfair-based Rokos, which specialises in betting on how broad economic trends will affect global markets, was wrongfooted early in 2021 when a sudden jolt higher in inflation expectations triggered a drop across equity and bond markets.
Rokos was hit again in October, when concerns over elevated global inflation prompted bets that central banks would need to speed up their exit from aggressive stimulus measures that had propped up the world economy since the depths of the coronavirus crisis in 2020.
At the same time, investors began worrying that policymakers might overcompensate in their bid to counter rapid price growth, denting the longer-term economic outlook.
Shorter-term bonds, which are highly sensitive to monetary policy expectations, sold off sharply in October, pushing the yields on those assets higher. Longer-term bond yields rose more modestly over the period.
This flattening of the so-called yield curve disrupted a popular hedge fund bet that long-term yields will rise more quickly than shorter-term ones 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 over often lacklustre performance among managers this year, a big shift into private equity and debt, and questions over funds’ fee structures.
Rokos, whose personal fortune is estimated at £1.25bn by the Sunday Times Rich List, is one of the UK’s most successful hedge fund traders. While at Brevan Howard he made more than $1bn in trading profits in both 2007 and 2011.
Rokos hedge fund made £900m profit in early days of pandemic
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