Hedge funds that bet on currencies are reaping the rewards for the beginning of 2015.
According to the Wall Street Journal, currency hedge funds gained 3.4% in January, compared to a 0.5% gain in stock-trading hedge funds and a 0.9% decline in emerging market funds. Their performance this January is the best start to the year since 2008, and for some even longer.
This is a big renewal in currency trading at hedge funds, which diminished greatly after the 2008 financial crisis. But with activity in currencies picking up in the last year, currency trades and profits are finally starting to pick up.
“People are focusing on foreign exchange in a way that they haven’t been for a long time,” one currency hedge fund manager, Robert Savage, told the WSJ.
WSJ cited data provided by Hedge Fund Research Inc and Barclays Hedge. According to Barclays Hedge, the hedge funds that performed the best used computer algorithms to find market trends. Trades that paid off include betting against foreign currencies that would weaken against the dollar, such as the euro, Australian dollar and Canadian dollar.