MH Model Portfolio: 2023 Portfolio Review – 8% Returns and Outperformed Benchmark
- By Bilal Hafeez
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Summary
- We made 69 trades in 2023 with a hit rate of 60%. Our portfolio generated an 8% return with a Sharpe of 0.6.
- Our best trades were short USD/COP (Jan), long Hang Seng (Jan), and receive SEK vs EUR 2y swaps (Jan).
- Our worst trades were paying US 1y1y (Sep), short USD/CNH (Jan), and long UK 10y vs Fra 10y (Nov).
- Take all of our results with a pinch of salt as ours is a paper portfolio!
Portfolio Year in Review
At Macro Hive, we like to make our views as actionable as possible, so we are constantly expressing these views as trades. Moreover, we also like to hold ourselves accountable, so we track the performance of all of our trades in our model portfolio. So how did we do this year? Here are four takeaways:
- We published 69 trade ideas in 2023 spanning rates (36), FX (27), commodities (3), and equities (3). Our hit rate was 60%.
- The Macro Hive portfolio ended the year up 8.3%, outperforming the Bloomberg Discretionary Macro Hedge Fund Index by 3.8% (index returns to November). Moreover, this return was achieved with a similar level of volatility resulting in a Sharpe ratio of 0.64 versus 0.14 for the benchmark. Of course, our returns are theoretical so take it with a pinch of salt!
- Over 2023, we had four overarching themes that we traded: DM inflation stickiness, US economic strength, China re-opening and EM FX carry. The best performing theme was long EM carry, followed by the China re-opening. Meanwhile, the lowest performing theme was DM inflation stickiness.
- Our best individual trades were short USD/COP, long Hang Seng, and receiving SEK vs EUR 2y swaps at the start of the year. Later in the year, long US homebuilders and short US 1y1y vs UK 1y1y were also highly profitable (Table 1).
- Our worst individual trades included paying US 1y1y in September, short USD/CNH in January and long UK 10y vs France 10y in November (Table 2).
- Across asset classes, our best average returns per trade were in equities, followed by commodities, followed by FX and finally rates (Table 3). Admittedly, we made only a handful of trades in equities and commodities.
Overall, a very positive year for the Hive, and we look forward to 2024 as we work with you to deliver more profitable trade ideas.
Historic Performance
Our portfolio has returned +8.3% YTD, up 0.2% since last week, and has returned +50.8% since inception (+11.0 % annualised) with a 1.1 Sharpe ratio. This continues to place it above the average discretionary macro hedge fund (Bloomberg: BHDMAC Index; Chart 1). Our largest risk positions (VaR) are in rates, followed by FX, with the smallest position in commodities. Note: Our P&L are paper returns so will be overstated relative to a real invested portfolio.
Current Trades
DM
Rates
- Receive Jan 24 Fed Funds (target -13 bps) – read here.
- Long 1y1y vs 2y3y SOFR (target 0 bps) – read here.
- 5s10s UST steepener (target 15bps) – read here.
FX
- Long NOK/SEK (target 1:000; stop 9533) – read here.
EM
FX
- Long 6M EUR/TRY digital put, strike 32.0 – read here.
- Short 2m PHP/THB NDF (target 0.60; stop 0.66) – read here.
- Long 2m CNH/INR (target 12:20; stop 11.15) – read here.
- Long EUR/CZK (target 25:60; stop: 24:00) – read here.
Rates
- Receive BRL DI K25 (target 9.50%; stop 10.80%) – read here.
- Receive 5Y ZAR swap (target 7.50%; stop 8.75%) – read here.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.