The hedge fund of billionaire trader Chris Rokos has racked up profits of more than $1bn so far this year, as a bet that the market was getting ahead of itself in forecasting aggressive interest rate cuts from the Federal Reserve paid off handsomely.
Rokos Capital Management, which manages just under $16bn of assets, is up 8.8 per cent in 2024, according to a person who had seen the numbers.
The company has told investors that the gains, which were up to Friday last week, were largely driven by a sell-off in bond markets as investors came round to the Fed’s view that rates would fall slower than markets expected late last year, the person said.
Rokos Capital declined to comment.
In December, traders were pricing in roughly six quarter-point rate cuts in 2024 from the current level of 5.25 to 5.5 per cent, double the three signposted by Fed officials. But markets have dialled back their expectations following pushback from the central bank and a run of solid economic data that suggests the US economy is not sliding into a downturn.
Data released this month showed that inflation eased less than expected to an annual pace of 3.1 per cent in January, leading investors to ditch bets that borrowing costs would fall as soon as May.
Markets are currently pricing in three or four cuts by the end of this year, with the first move in June.
Two-year Treasury yields, which closely track interest rate expectations, have climbed to 4.6 per cent from less than 4.2 per cent in early January. Bond yields move inversely from prices.
The figures came after Rokos outperformed macro hedge fund rivals Brevan Howard and Caxton last year, delivering 8.8 per cent for the year. Brevan Howard’s flagship fund was down 2.1 per cent while its Alpha Strategies fund was up 2.4 per cent, according to people who have seen the figures.
Rokos was a star trader at Brevan, which he co-founded, earning billions of dollars for investors before striking out on his own in 2015.
Macro hedge fund Caxton’s Macro fund was down 9.2 per cent last year, while its flagship Global Investments fund lost about 1 per cent, according to investors.