Hedge Fund Sees 163% Return by Betting on Market Decline

An experienced investor's accurate prediction of the conclusion of easy money has resulted in triple-digit returns for his new hedge fund in its first full year of operation.

Neal Berger, the founder of Eagle's View Capital Management, had been running the fund of funds for 16 years before deciding to add his own fund to the mix. The Contrarian Macro Fund was launched in April 2021 with partner capital, and Berger was betting that the Federal Reserve would unwind a decade of stimulus, despite policy makers describing inflation as "transitory". Eventually, the Fed reversed course, and Berger began to accept external money.

Berger explained the motivation behind starting the fund was due to the fact that central bank flows were going to take a drastic turn. He noted that this shift would be a major obstacle for all asset prices. He went on to say that the prices they were seeing were, in his words, "wackadoodle".

The bet paid off, with the new fund achieving a return of approximately 163% in 2022, as per an investor document seen by Bloomberg. Berger declined to make any remarks regarding the fund's returns. Eagle's View, based in New York, manages a total of around $700 million, with $200 million in the Contrarian Macro Fund.

He is among a group of macro hedge fund managers, such as Said Haider, Crispin Odey and Michael Platt's BlueCrest Capital Management, who were able to capitalize on the economic climate during the past year of volatility and generate returns that were not seen in many other funds.

Berger revealed that he is taking advantage of futures contracts to bet against stocks and bonds that he believes have been inflated due to prolonged monetary stimulus.

Berger, who has had macro trading experience at Millennium Management, Chase Manhattan Bank and Fuji Bank, commented that the $19 trillion of sovereign debt trading at negative yields, the SPAC boom, the crypto boom, private equity valuations and public equity valuations are all connected. He stated that the common factor between them is the ocean of liquidity that was created in response to the Great Financial Crisis and then to Covid.

The Contrarian Macro Fund has mainly taken bearish positions on European and American assets, with hedges that will be beneficial during more positive times. After the Bank of Japan increased the upper limit for 10 year-yields, the fund also established short positions against Japanese bonds and bet that the yen would increase. According to Berger, this is the start of the conclusion of the global carry trade, which is designed to use currencies with low yields such as the yen to purchase something with higher returns.

Berger intends to maintain his short positions for a prolonged period of time. He believes that the suffering is not yet finished and the conclusion will only be evident after assets remain stagnant for a number of months.

He stated that although there are fluctuations in the market on a daily and monthly basis, the overall trend is downward. He emphasized that the price action is the ultimate indicator.