Brevan Howard Asset Management’s flagship macro hedge fund lost 5.4 percent last year, recording its worst annual performance since starting in 2003, according to an investor letter.

The Brevan Howard Master Fund, which managed $5.5 billion at the end of November, was flat last month, the letter showed. The full-year loss reverses the money pool’s 3 percent gain in 2016. A spokesman for the Jersey-based investment firm run by billionaire Alan Howard declined to comment.

Some of the largest hedge funds betting on economic trends in developed markets continued their poor performance in 2017 as a lack of volatility and central-bank interventions made it difficult for them to make money. Macro hedge funds returned an average of 3.8 percent on an asset-weighted basis during the first 11 months of last year, making them the worst-performing strategy of the year, according to Hedge Fund Research Inc.

Eoin Treacy's view

This aadditional article highlights how Crispin Odey’s fund lost 20% last year. The lack of volatility means that long/short strategies under perform. Hedging strategies deter for performance when they expire worthless. In fact, anything other than a leveraged momentum strategy would have been unlikely to outperform the primary indices last year. An alternative would have been to be highly concentrated on the FAANG stocks but that is not what hedged fund clients pay such high fees for.

Traditional hedge fund strategies have not been working for a couple of years now because we are in a period where trends have been more consistent. That has resulted in momentum taking precedence. ETF buying, risk parity and short volatility strategies might on first inspection appear different but are all momentum based strategies. At some stage opportunities will arise again for more fundamentally driven strategies but if Wall Street is in fact moving into the third psychological perception stage of the bull market then momentum could win out again this year.