LONDON (Reuters) - Harness Macro Currency Strategy, a hedge fund started by former Fortress Investment Group portfolio manager Philippe Peress, lost 8.8 percent in January, according to a letter from the fund to investors seen by Reuters.
The fund, which manages more than $750 million and in which Brevan Howard Investment Holdings Ltd has a stake, did not disclose the exact reason for the loss but the newsletter showed investments in Europe contributed the most to the decline.
The second-largest monthly loss for the hedge fund since its launch in 2009 came in a month when several large macro hedge fund managers were caught out by the Swiss National Bank’s (SNB) surprise decision last month to remove a cap on the franc, sending the currency soaring.
Harness did not provide immediate comment on the fund’s performance.
The Swiss franc surged as much as 40 percent to a high of 0.85 to the euro after the bank lifted its 1.20-franc cap on Jan. 15, inflicting deep portfolio losses on funds that were betting on the currency weakening.
“January was a challenging month for our strategy,” the hedge fund firm said in the letter, adding that the “current levels are not the new equilibrium for the currency (franc)”.
Harness, which did not detail its current position on the franc, told its investors that in its view the SNB will take interest rates deeper into negative territory by reducing the rate applicable to the near 300 billion Swiss franc ($324 billion) of deposits.
“The experience of the ECB (European Central Bank) in introducing negative rates should be fresh in their minds and the impact in Switzerland may be of a similar or larger scale,” Harness told clients.
The damage from the Swiss franc’s sharp moves was a blow for macro hedge fund managers, nursing wounds from nearly four years of mediocre performance.
Such funds, which focus on major economic trends and bet anywhere they see value, including stocks, currencies, bonds, commodities and derivatives markets, gained just under 4 percent last year, according to data from industry tracker Eurekahedge.
Macro managers such as Fortress Investment Group, COMAC Capital and Everest Capital suffered heavy losses in the week of Jan. 16 when the franc soared.
($1 = 0.9253 Swiss francs)
Additional reporting by Anirban Nag; editing by Carolyn Cohn and Susan Thomas